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Growth Prospects, Organic Performance Not Being Fully Appreciated By J&J Snack Foods Investors

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Although shares of J & J Snack Foods Corp (NASDAQ: JJSF) are currently trading close to record valuations and multiples, they do not seem to reflect the company’s growth prospects and strong organic performance, DA Davidson’s Eric M. Gottlieb said in a report. He initiated coverage of the company with a Buy rating and a price target of $135.

Analyst Gottlieb expects J&J Snack Foods to generate robust topline and bottom line. This expectation, along with acquisition opportunities and the possibility of the company being a buyout target, “drive our optimism.”

Large Player In Multiple Niche Markets

While the company has made significant progress, there is still room for growth in several product areas, offering good potential for continued mid-single-digit organic growth and low-double-digit earnings growth, Gottlieb mentioned.

Small Acquisitions

“The company has not made an acquisition since May 2014; it has made 12 over the last ten years, including five between 2010 and 2014,” the analyst wrote. J&J Snack Foods has the cash to make acquisitions and has been focusing on small purchases which reduces the risk, albeit reducing the opportunities for shorter-term investors.

“Transformational purchases are not in the company’s DNA, and debt, though an option, is likely not to be utilized. Targets are in the $50-$150 million range, but JJSF could go to $200 million without utilizing debt, and greater if it utilizes the balance sheet,” Gottlieb stated.

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Latest Ratings for JJSF

DateFirmActionFromTo
Aug 2019UpgradesEqual-WeightOverweight
Mar 2018Initiates Coverage OnSector Weight
Dec 2017Initiates Coverage OnBuy

View More Analyst Ratings for JJSF
View the Latest Analyst Ratings

Posted-In: DA Davidson Eric M. GottliebAnalyst Color Long Ideas Initiation Analyst Ratings Trading Ideas

 

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