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Dean Foods Benefits From Inflation


Low pricing power.

Return of inflation.

Better times ahead.

Dean Foods Company is a food, beverage and processing firm that distributes fluid milk, and dairy products in the United States. Dean Foods engages in manufacturing & marketing a range of branded and private labeled dairy products. As of August 30, 2017, the Company had about 45 brands. 

  • Low pricing power

2017 as a whole saw dairy products prices decline at the cash register which put downward pressure on Dean Foods share price, but December we saw prices turn around and start to rise.

In December of 2017 share price of DF went from $10.50 to $11.50 at years end. About 1.56 M shares were traded on any given day. The company’s price to cash flow for trailing 12 months is about 5.7 and total debt to equity ratio of Dean Foods most recent quarter is 1.55 and Long Term debt to equity ratio for December is 1.31 

  • Return of inflation

Inflation has been rising in the past few weeks, this will allow retails and grocers to raise prices as needed to maintain profitable balance sheets.

The firm's price to earnings ratio calculated as 32.72, the firm stands at a price to sale ratio of 0.14 that signifies the value placed on each dollar of a firm’s sales or incomes, it is the most relevant ratio to compare companies in similar sectors. It has a price to tangible book ratio of 2.75, which gauges the market price of a share over its book value.

The firm has price volatility of 2.33% for a week and 2.91% for a month. The stock price of DF is moving up from its 20 days moving average with 0.35% and isolated positively from 50 days moving average with 7.02%. 

  • Better times ahead

We expect future demand for goods and products to pick up and increase over the next 2 years as the United States economy expands at a near 3% GDP rate. 

Dean Foods latest quote of $11.27 will find technical support in $11.20 breakdown below this region would be a significantly bearish signal for Dean Foods short term traders. If Dean Foods shares can stay above the price of  $11.20 a share in the next few trading sessions, that should help propel Dean Foods higher to the next line of resistance at $12.30 in the next 30 days, which is a 5% move up. 

The newly signed 'Tax Cuts and Jobs Act' should support economic growth and company profit through less income tax liability.