Moa Group Limited (NZSE:MOA), a NZDNZ$30.06M small-cap, is a beverage company operating in an industry which is facing changes in demographics and purchasing behaviours forcing beverage companies to adapt to new trends. Consumer staple analysts are forecasting for the entire industry, a strong double-digit growth of 12.91% in the upcoming year , and a strong near-term growth of 29.25% over the next couple of years. This rate is more than double the growth rate of the NZ stock market as a whole. Today, I will analyse the industry outlook, as well as evaluate whether Moa Group is lagging or leading in the industry. View our latest analysis for Moa Group
What’s the catalyst for Moa Group’s sector growth?
The beverage industry is reshaping itself, avoiding traditional sugary drinks and mass-market tactics for approaches that are more focused on health and personalized customer interaction. Players in the industry are tracking these changes more closer than ever to gauge consumer preferences so they can remain ahead of these trends. In the previous year, the industry saw growth in the teens, beating the NZ market growth of 5.42%. Moa Group lags the pack with its sustained negative earnings over the past couple of years. The company’s outlook seems uncertain, with a lack of analyst coverage, which doesn’t boost our confidence in the stock. This lack of growth and transparency means Moa Group may be trading cheaper than its peers.
Is Moa Group and the sector relatively cheap?
The beverage industry is trading at a PE ratio of 26x, above the broader NZ stock market PE of 14x. This means the industry, on average, is relatively overvalued compared to the wider market. However, the industry returned a similar 10.98% on equities compared to the market’s 12.48%. Since Moa Group’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Moa Group’s value is to assume the stock should be relatively in-line with its industry.
What this means for you:
Are you a shareholder? Moa Group has been a beverage industry laggard in the past year. If your initial investment thesis is around the growth prospects of Moa Group, there are other beverage companies that have delivered higher growth, and perhaps trading at a discount to the industry average. Consider how Moa Group fits into your wider portfolio and the opportunity cost of holding onto the stock.
Are you a potential investor? If Moa Group has been on your watchlist for a while, now may be a good time to dig deeper into the stock. Although its growth has delivered lower growth relative to its beverage peers in the near term, the market may be pessimistic on the stock, leading to a potential undervaluation. Before you make a decision on the stock, I suggest you look at Moa Group’s future cash flows in order to assess whether the stock is trading at a reasonable price.