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Cal-Maine Is An Excellent Value Play

William Bias profile picture
William Bias


  • Cal-Maine is doing well so far this year despite record production and increased regulations.
  • Cal-Maine’s management demonstrated financial prudence by reducing long-term debt in the past year.
  • Cal-Maine pays a solid dividend.

On March 30, egg producer Cal-Maine (NASDAQ: NASDAQ:CALM) came out with its Q3 2015 earnings announcement and 10-q. The company beat the Wall Street expectations game on the revenue front but missed by $0.05 on the EPS front serving as a catalyst for a roughly 2% decline in stock price on the day of the announcement. However, Cal-Maine's Q3 results continue to prove Cal-Maine is a compelling investment. Here's why.

The numbers

Cal-Maine saw its year-to-date revenue, net income and free cash flow increase 10%, 48% and 150% respectively. In addition, Cal-Maine's management exercises excellent financial prudence by maintaining a solid balance sheet. Its $238 million in cash and liquid investments comprised 35% of stockholder's equity in the most recent quarter exceeding my personal threshold of 20%. Amazingly, the company even reduced long-term debt 15% year-over-year. In the most recent quarter, Cal-Maine's long-term debt equated to 6.4% vs. 8.6% for the same time in 2014. Interest expense declined as a result contributing to the increase in net income.

What drove the numbers?

Two main things drove Cal-Maine's revenue: increased demand and price increases. Any business owner wants to see demand for products increase vs. artificial or temporary improvements such as acquisitions which could disguise a decrease in demand to the casual stock market observer. The demand increased despite a record level of hen flock according to the earnings announcement.

The company is still benefiting from the healthy lifestyles movement which served as a catalyst for a 24% increase in its specialty eggs sales so far this year. Moreover, record corn and soybean harvests due to more favorable weather conditions in North America drove year-to-date feed costs down 9% contributing to net income expansion. Demand also drove free cash flow expansion despite a 52% year-over-year increase in capital expenditures.

Over the

This article was written by

William Bias profile picture
I have been analyzing stocks since 1992 and a freelance writer since 2012.

Analyst’s Disclosure: The author is long CALM. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (3)

MrEng profile picture
Very much enjoyed your write up on CALM. The stock has gone from $38 at the time of your publication to $56 today. With no apparent notice by the SA audience. So congratulations on a great call.
William Bias profile picture
Thanks MrEng,

I think the Avian Bird Flu scare had a lot more to do with the short term run up. The stock price has corrected some in the past couple of days. I am a long-term owner of this company. People need to eat and will increasingly buy Cal-Maine's organic specialty eggs which is less prone to holidays.

Thanks for reading.

30372955 profile picture
I agree. This really was a great call. The stock price seems to have settled a bit, but I'm happy with my gains and holding on for more. Thanks!
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