In This Article:
Delegat Group Limited (NZSE:DGL), a NZ$768.59M 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 10.55% in the upcoming year , and a whopping growth of 31.73% over the next couple of years. Not surprisingly, this rate is more than double the growth rate of the NZ stock market as a whole. Below, I will examine the sector growth prospects, and also determine whether Delegat Group is a laggard or leader relative to its consumer staples sector peers. View our latest analysis for Delegat Group
What’s the catalyst for Delegat 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. Over the past year, the industry saw growth in the teens, beating the NZ market growth of 5.42%. Delegat Group lags the pack with its negative growth rate of -15.50% over the past year, which indicates the company will be growing at a slower pace than its beverage peers. Although Delegat Group is poised to deliver a 0.001% growth next year, moving it from negative to positive territory, it still lags its industry average rate of growth of 10.55%.
Is Delegat Group and the sector relatively cheap?
The beverage industry is trading at a PE ratio of 25.33x, higher than the rest of the NZ stock market PE of 13.48x. This means the industry, on average, is relatively overvalued compared to the wider market. However, the industry returned a similar 11.16% on equities compared to the market’s 11.76%. On the stock-level, Delegat Group is trading at a lower PE ratio of 18.9x, making it cheaper than the average beverage stock. In terms of returns, Delegat Group generated 13.24% in the past year, which is 2.08% over the beverage sector.
Next Steps:
Delegat Group is a beverage industry laggard in terms of its future growth outlook. This is possibly reflected in the PE ratio, with the stock trading below its peers. If the stock has been on your watchlist for a while, now may be the time to dig deeper. Although the market is expecting lower growth for the company relative to its peers, Delegat Group is also trading at a discount, meaning that there could be some value from a potential mispricing. However, before you make a decision on the stock, I suggest you look at Delegat Group’s fundamentals in order to build a holistic investment thesis.