Cal-Maine Foods (NASDAQ: CALM) is
the largest producer of fresh shell eggs in the United States, distributing its products to grocery store chains, club stores, foodservice distributors and egg product manufacturers throughout the southwestern, southeastern, mid-western and mid-Atlantic regions. The company also offers reduced cholesterol, cage free, and organic eggs under the Egg-Land's Best and Farmhouse labels. Cal-Maine operates breeding facilities, hatcheries, feed mills, egg production sites and processing facilities in 16 states across its distribution regions. It provides for nearly 16% of total U.S. egg consumption.
Investors were pleased Monday, when Barron's reported that CALM shares could double over the next year. Analysis was offered suggesting the potential for $7 per share in earnings next year, a three-fold increase from early 2008 levels.
The stock
popped on the news and then moved into a bullish "pennant" consolidation pattern. Prices frequently exit pennants moving in the same direction they were traveling on entry. In this case, that would be to the upside.
The CALM P/E ratio (5.72), Price to Sales ratio (0.90), Price to Free Cash Flow ratio (6.84), Sales Growth rate (58.68%), EPS Growth rate (226.29%), Operating Margin (23.30%), Net Profit Margin (15.71%), Return on Assets (31.43%), Return on Investment (42.04%) and Return on Equity (69.01%) compare favorably with industry, sector and S&P 500 averages. Institutions own about 95% of the outstanding shares. Over the past 52 weeks, the stock has traded between $13.88 and $40.75. A stop-loss of $31.75 looks good here. Note that Cal-Maine is next expected to report quarterly results at the end of July.
Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com. He does not hold a position in the stock discussed above.
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