Sector financial performance:

This company, who primarily produces, sells, and markets lemon and avocado, has been grouped into lemon growers sector in farm industry.

As our data indicates that the sales volume of fresh lemon has been growing at average 9% annual growth in the past several years. While the increase in sales volume for lemon was accompanied by deflation of price before 2017, we think the growth in sales volume has been supported by strong demand, which resulted in higher sales volume and price in 2018.

Because this is a typical sector where fixed costs usually account for a significant percentage of total costs, the increase in sales volume in the past several years seems to play more significant role in improving companies’ margin and as well profitability than changes in price do, which seems to be determined by temporary market  imbalance of supply and demand.  

Our data indicates that companies in this sector usually have about 23% gross margins and 11% operating margins in 2018.

According our analysis, companies’ enterprise price/adjusted EBI is around 57 with interest/EBITDA ratio of 7%. 

                                                                                                       click for reading more about this industry

Company performance:

It seems that demand for fresh lemons of this company has been increasing in the past three years as indicated by the increased sales volumes. While price had continued to decrease between 2015 and 2017, it went up by 3% in2018 accompanied with increase in volume.

Demand for avocado seems to be more volatile as price changed.  

For the first nine months of fiscal 2018 compared with same period of 2017(ended 20180731)

The sales of this company increased 9% primarily attributable to increase in sales of lemon (up 12%, mainly higher volume of 10% and higher price of 3%) and increase in citrus product but offset by decrease in sales of avocado (down 31%, lower price).     

For fiscal 2017 compared with 2016(ended 20171031)

The sales of this company increased 9% primarily attributable to increase in sales of lemon (up 10%, mainly higher volume of 10% and lower price of 3%)  and increase in citrus product but offset by decrease in sales of avocado (down 12%, lower volume and higher price).     

The sales of this company increased 16% in the first nine months of fiscal 2017 compared with the same period of 2016, primarily attributable to increase in sales of lemon (up 19%, mainly higher volume and lower price) but offset by decrease in sales of avocado (down 12%, lower volume and higher price).     

The sales of this company increased 11.5% in fiscal 2016 compared with the same period of 2015, primarily attributable to increase in sales of lemon (up 8%, mainly higher volume of 8% and lower price 0%) and increase in sales of avocado (up 51%, mainly higher volume and lower price).    

The sales of this company decreased 3% in fiscal 2015 compared with the same period of 2014, primarily attributable to decrease in sales of oranges and also decrease in sales of lemon (down 1%, mainly lower volume of 7% and higher price of 3%) and decrease in sales of avocado (down 3%, mainly lower price but higher volume).    

Gross margins (including packing, harvest, and growing costs) changed between 18% and 24% since fiscal 2014, presenting a perfect consistency with changes in sales/volume since fixed costs involved in lemon production, sales, and marketing account for a large portion of the total costs. Correspondingly, with the same pattern the operating margins changed between 5% and 12%.

Stock price

This stock currently has an enterprise price/EBI ratio of 57, which we think, is relatively slightly undervalued considering strong demand.