Bridgford Foods: The Dough Finally Rises

Mark Krieger
1.84K Followers

Shareholders may soon see their wallets get fatter. NASDAQ:BRID reported spectacular first quarter earnings that blew away even the most optimistic expectations. The company reported earnings of 16 cents versus a 3 cent loss. Sales were up about 1% to $31.5 million.

Expectations were annihilated: The consensus of analysts expected BRID to report sales of $30.4 million and earnings of 6 cents. BRID’s top line of $31.5 million exceeded expectations by 4%, but the bottom line (where it counts) is where the fireworks were apparent, as the company was able to produce a very impressive 166% earnings beat.

How they did it: It’s all about the gross margin baby. I had expected improvement - due to the fall of wheat and fuel prices, but I never imagined the progress would be so great. BRID’s gross profit margin rose 17% or 558 basis points from 33.02% to 38.60%. Management was also effective, keeping its overall cost structure in check, as its SG&A costs, fell 40 basis points, from 32% to 31.6%. The company’s stock repurchase plan also helped drive its bottom line. Its share count dropped about 5% from 9.9 million to 9.4 million shares, and when you allocate your earnings through fewer shares, earnings per share are guaranteed to rise. BRID's cash position also stacked up favorably, as it grew at brisk 67% clip within the last three months, from $6.1 million to $10.2 million.

Bottom line: BRID just produced one of its best quarters in several years, despite a woefully poor economic climate. I would expect the market to greet the news with exuberance and reward the share price accordingly. A doubling of the stock price would not surprise me at all, especially with some very nervous shorts jumping on the buy side to avoid a sure squeeze. If you annualize the current quarter’s

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1.84K Followers
I am a value/activist investor dedicated to the following ideals: (1) Focus on high relative strength, (2) Buy low, sell high aka "buy the dip, sell the rip" (3) Short high, cover low, (4) Go against the crowd, (5) It's all about the rules and discipline- hold them dear (6) Analyze the balance sheet-seek low debt,high cash and hidden value scenarios (7) Cut your losses short, let your gains run, (7) Don’t get emotional, (8) Follow the insiders- buy if they are buying, sell if they are selling (9) Be greedy when others are fearful and fearful when others are greedy.(10) Don't argue with the market unless you detect an inefficiency present-it is smarter than you are. In summary, some of these ideas might be construed as rather trite and overused, but consistent use of them pays off in the long run. I tend to focus on the food sector and am the originator of the "Basic Food Fund" index and the "Dirt Cheap Value Portfolio" and the "EVR" (Extreme Value Ratio). Why the food sector? "Everybody has to eat'". Full disclosure, the last two years have been brutal on my portfolio. I'm deeply in the red due to concentrated positions, lack of discipline and plain old stubbornness. The old adage , "let your winners run and cut your losses short" has always been a difficult concept for me to handle. I have been known to take activist positions in microcap companies in the past. I graduated from the University of Southern California with a BS in Business Administration.

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