JJSF - J&J Snack Foods: A Good Business But Overvalued

2024-02-07 09:02:53 ET

Summary

• J&J Snack Foods' stock price has remained stagnant after the COVID-19 pandemic while the S&P 500 had a return of approximately 110%.
• The company has a good business and good future perspectives.
• The stock valuation is too rich both using the dividend discount model and discounted cash flow model.

J&J Snack and Foods (JJSF) operates in snacks and beverages, a mature industry that exhibits limited growth potential, mainly driven by price increases related to inflation. Nevertheless, the company can expand its business in the future and achieve a higher growth rate than the industry by leveraging its innovative capabilities and pursuing mergers and acquisitions, capitalizing on its strong balance sheet. As usually happens when there is potential for future growth the market capitalization is too rich and I would prefer to see a major decrease in stock price before considering buying shares....

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