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J.M. Smucker Isn't A Company You Want Right Now

Mar. 11, 2020 7:00 AM ETThe J. M. Smucker Company (SJM)


  • J.M. Smucker is a company I've been following for some time. I like the company's overall fundamentals and potential future returns at the right valuation.
  • Those valuations are, however, too high at this time - and combined with a muted growth prospect, Smucker's isn't as appealing as it once was, especially in the market context.
  • The J.M. Smucker Company is a "HOLD", despite some fundamental undervaluation.

Context is crucial. You'll often hear me talking about only buying undervalued companies, and this is true. I try to focus strictly on undervalued businesses. However, all undervalued businesses are certainly not the same. In times of general overvaluation, deals are rare and good companies at cheap value are few and far between.

This is not the case now, however. Being that it's what we're seeing, I thought it an excellent time to update on one of my portfolio positions - the J.M. Smucker Company (NYSE:SJM).

Bildresultat för JM Smucker logo

The J.M. Smucker Company - How as the company been doing?

Investing in SJM for me has, over the course of my owning stock in the company, been an excellent investment. The company has even held up fairly against the overall coronavirus scare we're currently seeing, to where the stock is up 5% compared to the S&P's 5.5% drop (a 10%+ difference), looking to my last article about the company.

(Photo Source)

We also have a new quarterly report - so let's go through that one real quick before moving on.

The company's softness in sales continued to rear its head during 3Q20:

  • Net sales drop of 2%, as well as a drop in the gross profit margins.
  • Declines in operating income and income margins.

There were plenty of positives too, however, mainly:

  • Significantly higher FCF, coming in at south of $0.5B for the quarter.
  • Significant lowering of gross debt/EBITDA, from a 3.8X to a 3.3X YoY, with corresponding improvements (up from $1560 to $1618M) in quarterly EBITDA.
  • Volume improvements in coffee and consumer foods, profit growth in coffee, with improving margins in pet foods and coffee.

Bildresultat för Smuckers jams

(Photo Source)

Looking over the whole company, however, the turnaround we're looking for as investors continue to be an elusive one indeed. SJM is still struggling with margins

This article was written by

Wolf Report profile picture

Wolf Report is a senior analyst and private portfolio manager with over 10 years generating value ideas in European and North American markets.

He is a contributing author for the investing group iREIT on Alpha where in addition to the U.S. market, he covers the markets of Scandinavia, Germany, France, UK, Italy, Spain, Portugal and Eastern Europe in search of reasonably valued stock ideas. Learn more.

Analyst’s Disclosure: I am/we are long SJM, GIS. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

While this article may sound like financial advice, please observe that the author is not a CFA or in any way licensed to give financial advice. It may be structured as such, but it is not financial advice. Investors are required and expected to do their own due diligence and research prior to any investment. I own the European/Scandinavian tickers (not the ADRs) of all European/Scandinavian companies listed in my articles.

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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