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Saputo Inc. (TSX: SAP) is a dairy processor and cheese producer and has presence across Canada, the USA, Argentina, the United Kingdom, and Australia and sells products across more than fifty countries.
Key Updates:
Q3FY22 Financial Highlights:
Q3FY22 Income Statement Highlights (Source: Company Report)
Risks associated with the investments:
The group’s income is interrelated with international cheese and dairy ingredient market prices, while price volatility is likely to hamper the company’s profitability and cash flow. Higher input costs coupled with changing consumers preferences could dampen the overall company’s performance.
Valuation Methodology (Illustrative): Price to Earnings based
Analysis By Kaline Group
Stock Recommendation:
Overall, the retail market segment continues to perform well, and we expect the company’s sales to keep in pace with the pre-pandemic levels. This is likely to contribute to the overall volumes and income in the coming days. We expect the demand for the products to remain elevated, with continued strength in the retail and industrial market segments and a steady improvement in the foodservice market segment.
We have valued the stock using price to earnings based relative valuation method and have arrived at a double-digit upside (in percentage terms). For the said purposes, we have considered peers like Metro Inc, Aritzia Inc etc. Considering the aforesaid facts, we recommend a ‘Buy’ rating on the stock of SAP at the last closing price of CAD 25.08 on May 26, 2022. Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.
One-Year Technical Price Chart (as on May 26, 2022). Analysis by Kalkine Group
The reference data has been partly sourced from REFINITV
Technical Analysis Summary
Disclaimer
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