Fleury Michon SA (EPA:FLE), a €238.5m small-cap, is a consumer staples company operating in an industry which is facing a change in consumer taste and pressure for organic and sustainable foods, spurred by more health-conscious consumers. Consumer staple analysts are forecasting for the entire industry, a positive double-digit growth of 19.9% in the upcoming year , and an enormous growth of 54.0% over the next couple of years. This rate is larger than the growth rate of the FR stock market as a whole. Below, I will examine the sector growth prospects, and also determine whether Fleury Michon is a laggard or leader relative to its consumer staples sector peers.
See our latest analysis for Fleury Michon
What’s the catalyst for Fleury Michon’s sector growth?
Changing tastes in consumer preferences is becoming more disruptive than that of industry competitors. Consumers are predominantly leaning towards more health-conscious alternatives such as whole and raw ingredients. Additionally, new companies with unique business models have emerged in the wake of this healthier food trend. Over the past year, the industry saw growth of 8.0%, though still underperforming the wider FR stock market. Fleury Michon leads the pack with its impressive earnings growth of 37.8% over the past year. Furthermore, analysts are expecting this trend of above-industry growth to continue, with Fleury Michon poised to deliver a 51.5% growth over the next couple of years compared to the industry’s 19.9%. This growth may make Fleury Michon a more expensive stock relative to its peers.
Is Fleury Michon and the sector relatively cheap?
The food product sector’s PE is currently hovering around 15.83x, relatively similar to the rest of the FR stock market PE of 17.04x. This means the industry, on average, is fairly valued compared to the wider market – minimal expected gains and losses from mispricing here. Furthermore, the industry returned a similar 9.2% on equities compared to the market’s 10.8%. On the stock-level, Fleury Michon is trading at a PE ratio of 18.03x, which is relatively in-line with the average food product stock. In terms of returns, Fleury Michon generated 5.8% in the past year, which is 3.4% below the food product sector.
Next Steps:
Fleury Michon’s industry-beating future is a positive for shareholders, indicating they’ve backed a fast-growing horse. However, this high growth prospect is most likely factored into the share price, given the stock is trading in-line with its peers. If Fleury Michon has been on your watchlist for a while, now may be the time to enter into the stock. If you like its growth prospects, you’ll be paying a fair value for the company. However, if you’re hoping to gain from an undervalued mispricing, this is probably not the best time. However, before you make a decision on the stock, I suggest you look at Fleury Michon’s fundamentals in order to build a holistic investment thesis.