AVO - Mission Produce: Still Overvalued Despite Price Decline

2024-02-10 04:47:16 ET

Summary

• Mission Produce is a global leader in avocado production and distribution, with farms in multiple countries.
• Avocados are an on-trend superfood with rising consumption globally.
• However, despite a positive outlook for avocados, the business of growing and selling the fruits are tough, with volatile prices and low margins.
• My estimate of intrinsic value for Mission Produce remains ~$7.50, assuming mid-cycle gross margins of 11%. I would be a buyer of AVO only if it falls significantly below intrinsic value.

It has been a while since I last analyzed Mission Produce ( AVO ), a vertically integrated grower and distributor of avocados. When I last analyzed the company in July 2022, I thought the company's shares were overvalued relative to a discounted cash flow analysis of the company's business. Since my article, AVO's shares have fallen by over 25% while the S&P 500 has rallied 30% for a large performance gap (Figure 1)....

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