KEY forecasts a rise of 33% to $52. J&J Snack's stock trades at a forward earnings multiple of 14, a book value multiple of 2, a sales multiple of 1.1 and a cash flow multiple of 9.8 -- 8%, 53%, 27% and 20% discounts to food products averages.
Recent purchases of California Churros and Parrot Ice are likely to be accretive to 2010 earnings. The company has a record of modest acquisitions, boosting growth without compromising liquidity. California Churros generated $11 million of revenue in 2009. Management projects that Parrot Ice will add $2 million to fiscal 2010 sales. In the latest quarter, retail supermarkets were the fastest-growing division, with a sales gain of 14%. The food-services division increased sales 2.8% and the frozen-beverage unit grew sales 8%. Though recent economic optimism bodes well for riskier cyclical stocks, J&J Snack is worthy of consideration as a value play. According to Zacks Investment Research, over the past five years, J&J Snack's stock has traded at a price-to-earnings ratio 23% higher than that of the S&P 500. Over a 10-year span, it has traded at a 2% premium. Currently, J&J Snack trades at a 20% discount to the S&P 500. Management's recent purchases, an elevated net margin of 7% and $81 million of cash on hand are reassuring signs to investors. Also, if the economy weakens further, safe food-products stocks will garner attention. And J&J Snack is at the top of the heap.
-- Written by Jake Lynch in Boston.
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