MAPLE LEAF FOODS INC. $30

MAPLE LEAF FOODS INC. $30 (Toronto symbol MFI; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 134.6 million; Market cap: $4.0 billion; Price-to-sales ratio: 1.3; Dividend yield: 1.2%; TSINetwork Rating: Average; www.mapleleaffoods.com) is Canada’s largest food processor. It mainly sells its products, including fresh and prepared meats and poultry, under the Maple Leaf and Schneider brands. The company recently completed a multi-year restructuring plan that involved closing older meat processing plants and shifting their operations to newer, more efficient ones. Thanks to the success of this plan, Maple Leaf earned $42.3 million, or $0.31 a share, in the three months ended March 31, 2016. The results are a big improvement over the $2.9 million, or $0.02, it lost a year earlier. If you factor out unusual items, earnings per share jumped to $0.28 from $0.05. Sales rose 2.1%, to $796.9 million from $780.2 million. That’s mainly because it raised the selling prices on its products to cover rising input costs. Maple Leaf’s gross profit margin (gross profits as a percentage of revenue) jumped to 10.2% in the latest quarter from 4.7% a year earlier. That’s above its goal of raising its gross profit margin to at least 10%. The company’s improved earnings have also freed up cash for share repurchases: it spent $11.9 million on buybacks in the latest quarter. As of March 31, 2016, Maple Leaf held cash of $290.9 million, and its total debt was just $10.5 million. To lift its long-term prospects, the company is developing new products such as antibiotic-free meats. This food is more expensive to produce, but should help it profit from rising consumer demand for healthier meats. Maple Leaf will probably earn $1.40 a share in 2016. The stock trades at a somewhat high 21.4 times that forecast. The $0.36 dividend yields 1.2%. Maple Leaf Foods is a hold.