American Italian Pasta Co. Shows Impressive Growth

Despite the emergence of a fledgling rally, stocks making new highs have been few and far between. One of the companies leading the way is of all things, a pasta supplier. American Italian Pasta Company (AIPC) manufactures pasta that is then sold to well-known pasta companies such as Mueller’s (my all-time favorite) and Ronco. AIPC currently has a market capitalization of $450 million and a P/E ratio of 22.

Why is this consumer staple stock showing such tremendous growth potential? AIPC is benefiting from increased pasta consumption in the United States (likely the result of people shunning the once-popular no-carb. Atkins Diet). On December 10th, AIPC announced a year-over-year fiscal fourth-quarter revenue increase of 47%. Earnings estimates for 2009 range from $1.10 to $2 per share.

Investors liked the news. The stock went from $16.55 on December 10th to an intraday high on December 11th of $24.59. Currently, the stock has pulled back to $22.50.

From a technical perspective, AIPC has a lot of potential. The December 10th breakout occurred on extremely heavy volume. In contrast, the recent pull back has been orderly and on lighter volume. The best case scenario is for AIPC to continue to consolidate before continuing its upward climb. If AIPC can breakout above $23.80 on higher volume, and assuming market conditions continue to improve, the AIPC uptrend will likely continue for some time.

Disclosure: No positions at this time.

Comments

[Market Folly:]

we track hedge fund portfolios on our blog and noted that Whitney Tilson's T2 Partners sold out of their American Italian Pasta position last quarter: www.marketfolly.com/20...

2008 Dec 17 10:43 AM

[User 326350:]

As an employee of AIPC, I would like the author to know that AIPC doesn't "sell" to well known companies such as Muellers and Ronco. We ARE the makers of it and we OWN both those trade names and we SELL those brand names. The author should get it right before he puts this out there.

2008 Dec 26 07:21 PM