Calavo Growers: Turnaround In Place

Macrotips Trading profile picture
Macrotips Trading
2.2K Followers

Summary

  • Calavo Growers is a leading distributor of avocados and other fruits in the US.
  • The business suffered tremendously from COVID-19 supply chain disruptions, with the stock falling 70% from peak.
  • New management has implemented a turnaround plan that is starting to gain traction.

Avocado halves with trendy hard light and hard shadow on yellow background

MarsBars

Calavo Growers, Inc. (NASDAQ:CVGW) is an interesting consumer staple turnaround story. It capitalizes on strong ongoing consumer demand for avocados. With a new CEO and a turnaround strategy in place, there is a good chance Calavo can return to normalized

revenue and gross margin breakdown

Figure 1 - Calavo revenue breakdown (Calavo investor presentation)

avocado market

Figure 2 - Consumer demand increasing for avocados (Calavo investor presentation)

summary table of US population growth

Figure 3 - Hispanics is the fastest growing demographic (Pew Research)

barchart depicting gross profit and margin

Figure 4 - Calavo gross profit and margin (Author created with data from roic.ai)

barchart depicting operating profit and margin

Figure 5 - Calavo operating profit and margin (Author created with data from roic.ai)

summary of turnaround initiatives.

Figure 6 - Highlights of Calavo's turnaround plan (Calavo investor presentation)

Quarterly margin progression

Figure 7 - Calavo's turnaround taking hold (Calavo investor presentation)

summary forecast table

Figure 8 - summary forecast model (Author created with data from roic.ai)

DCF model

Figure 9 - Simple DCF forecast model (Author created)

sensitivity table

Figure 10 - DCF sensitivity to WACC and growth rate (Author created)

price to earnings

Figure 11 - Calavo P/E ratio from 2017 to 20219 (tikr.com)

Calavo price chart

Figure 12 - Calavo trying to form a bottom (author created with price chart from stockcharts.com)

This article was written by

Macrotips Trading profile picture
2.2K Followers
I spent 5 years as a co-founder and hedge fund CIO / manager. Before that, I was a hedge fund analyst/portfolio manager at a leading Canadian alternative asset manager. I write articles as part of my own due diligence on the stocks that I find interesting, for one reason or another.Follow me on twitter for my thoughts on macro trends.

Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, but may initiate a beneficial Long position through a purchase of the stock, or the purchase of call options or similar derivatives in CVGW over the next 72 hours. 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.

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