Topic: Growth Stocks

Saputo sees opportunity overseas

SAPUTO INC. $40 (Toronto symbol SAP; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 386.4 million; Market cap: $15.5 billion; Price-to-sales ratio: 1.4; Dividend yield: 1.5%; TSINetwork Rating: Average; is Canada’s largest producer of dairy products, including milk, butter and cheese. It also operates dairies in the U.S., Australia and Argentina.

The company earned $727.8 million, or $1.84 a share, in the fiscal year ended March 31, 2017. That’s up 16.2% from $626.6 million in 2016. The gain is largely due to higher selling prices combined with lower warehousing and transportation costs.

Saputo’s sales rose just 1.6%, to $11.2 billion from $11.0 billion. It gets 64% of its sales from outside of Canada, and unfavourable currency exchange rates cut $145 million from its overall sales for fiscal 2017.

The company will likely use its strong balance sheet to purchase dairy firms outside of Canada. As of March 31, 2017, it held cash of $250.5 million, or $0.65 a share. Saputo’s long-term debt of $1.5 billion is a low 10% of its market cap. However, using acquisitions to expand adds risk.

Saputo Inc. is still a hold.


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