SAPUTO INC. $40

SAPUTO INC. $40 (Toronto symbol SAP; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 392.8 million; Market cap: $15.7 billion; Price-to-sales ratio: 1.4; Dividend yield: 1.4%; TSINetwork Rating: Average; www.saputo.com) is Canada’s largest producer of dairy products, including milk, butter and cheese. It also operates dairies in the U.S., Australia and Argentina.

In its 2016 fiscal year, which ended March 31, 2016, Saputo’s sales rose 3.1%, to $11.0 billion from $10.7 billion in 2015. Earnings gained 7.6%, to $626.9 million from $582.8 million. The company spent $91.8 million on share buybacks in 2016. As a result, earnings per share rose 8.2%, to $1.58 from $1.46.

Saputo continues to benefit from its recent acquisitions of dairy producers in Australia and North America. As well, the lower Canadian dollar boosted the contribution of its overseas operations. They supplied 65% of its 2016 sales.

The company is looking at acquiring cheese-making plants in Brazil. However, relying on acquisitions to fuel its growth adds to its risk.

Saputo is a hold.

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