J & J Snack Foods (NASDAQ: JJSF) manufactures, markets, and distributes snack foods and beverages to the food service and retail supermarket industries. Some of their name brands include ICEE, SuperPretzel, Mrs. GoodCookie, Bavarian Pretzel, Country Home Bakery, Luigi’s Italian Ice, Slush Puppie, and several other well-known brands.
The company has a very strong balance sheet with a current ratio above 3 and a LT-Debt/Equity ratio below 0.1. J & J also has one of the most consistent earnings track records I have seen in a while. It has increased earnings for nine out of the last ten years, and is 10/10 when it comes to increasing revenues. Many investment gurus, including Warren Buffett, love to see companies with this type of track record.
At its current market price, I believe J & J is fairly valued. Companies that consistently increase their earnings like J & J tend to rarely be mispriced. However, consistent earners can be attractive takeover targets. With recent consolidation in the snack food market, this could become a possibility in the future. I am not one to speculate on takeovers, nor do I recommend companies based solely on the possibility of a takeover, but it is a small point to consider.
You could initiate a small position in the company at this time. I believe there is very little downside at this valuation level. Any further drop below $50 could provide an even more attractive buying opportunity and if technical analysis of this stock is correct, there could be a temporary pullback that could send the price below $50. However, like I stated earlier, I do think that the company is fairly valued at its current price. Therefore, do not worry if the company temporarily dips, but also do not expect the company to rise at a quick rate. This is a long-term small cap play, and J & J should continue to grow at a faster rate than the market as a whole over the next few years.
Please comment on the post to discuss what you think about JJSF.
Disclosure: I have no positions in any stocks mentioned, and do not intended on initiating a long position over the next 72 hours.
Disclaimer: As with any investment, due diligence is required. The opinions in this article are not intended to be used to make a particular investment or follow a particular strategy.