Immediately we’re diving into the funds of Pilgrim’s Satisfaction Company (PPC), one of many heavyweights within the rooster manufacturing business. I’ve been crunching some numbers from their 5-year financials. Whether or not you’re a seasoned investor or simply somebody inquisitive about the place to park your cash, this weblog submit will assist.
First Impressions: Who Is Pilgrim’s Satisfaction?
Should you’re not acquainted, Pilgrim’s Satisfaction is an enormous title within the poultry sport.
They’re one of many largest rooster producers within the U.S., with operations stretching to Puerto Rico, Mexico, and even worldwide markets just like the UK and Asia. They’re a subsidiary of JBS S.A., the Brazilian meat-processing big, they usually’ve been round since 1946.
From contemporary rooster to totally cooked nuggets, they provide retailers, eating places, and grocery shops with quite a lot of merchandise below manufacturers like Simply BARE and Gold Kist.
Sufficient about their enterprise mannequin, let’s discuss numbers and see if this firm is price your funding {dollars}.
The Earnings Assertion: Income Progress and Profitability Tendencies
High Line (Income)
Let’s begin with the highest line: income. Over the previous 5 years, Pilgrim’s Satisfaction has proven a strong upward pattern in whole revenues:
| SL | 12 months | Complete Income (in million $) | YOY Progress |
|---|---|---|---|
| 1 | 2020 | 12,091.90 | – |
| 2 | 2021 | 14,777.46 | 22.21% |
| 3 | 2022 | 17,468.38 | 18.21% |
| 4 | 2023 | 17,362.22 | -0.61% |
| 5 | 2024 | 17,878.29 | 2.97% |
| – | – | CAGR (5Yrs) | 8.14% |
That’s a compound annual progress charge (CAGR) of about 8.14% from 2020 to 2024, which is fairly spectacular for an organization in a comparatively mature business like poultry.
The leap from 2020 to 2021 (22.21% progress) doubtless displays a rebound from pandemic-related disruptions, with demand for rooster hovering as eating places reopened and shoppers stocked up on protein. Nonetheless, progress slowed in 2023 (a slight dip of 0.6%) earlier than ticking up once more in 2024 (3%).
This tells me that PPC has been navigating some volatility, presumably as a result of inflation, provide chain points, or fluctuating feed prices, however they’ve managed to maintain income comparatively steady.
Gross Margin
Now, let’s discuss profitability. Their gross revenue margin has been a little bit of a rollercoaster:
| SL | 12 months | Gross Margin (%) | YOY Progress |
|---|---|---|---|
| 1 | 2020 | 6.93% | – |
| 2 | 2021 | 9.24% | 33.33% |
| 3 | 2022 | 10.37% | 12.23% |
| 4 | 2023 | 6.44% | -37.90% |
| 5 | 2024 | 12.94% | 100.93% |
| – | – | CAGR (5Yrs) | 13.30% |
The leap in 2024 to 12.18% is a standout. It suggests PPC has both improved operational efficiencies, negotiated higher pricing, or managed enter prices (like feed and labor) extra successfully.
On the flip aspect, the dip in 2023 to six.44% raises a pink flag, margins took successful, presumably as a result of rising prices or aggressive pricing pressures.
EBITDA and Web Margin
After we drill right down to EBITDA margin and web revenue margin, the story will get much more attention-grabbing:
| SL | 12 months | EBITDA Margin | Web Margin |
|---|---|---|---|
| 1 | 2020 | 4.82% | 0.78% |
| 2 | 2021 | 4.05% | 0.21% |
| 3 | 2022 | 9.22% | 4.27% |
| 4 | 2023 | 5.90% | 1.85% |
| 5 | 2024 | 12.18% | 6.08% |
| – | CAGR (5Y) | 20.37% | 50.79% |
The online revenue margin in 2024 (6.05%) is a large enchancment from the razor-thin 0.21% in 2021. This aligns with what I’ve seen on the information mentioning PPC’s robust This autumn 2024 efficiency, with adjusted web revenue hitting $1.086 billion. However let’s not get too excited simply but as a result of we should additionally take a look at how a lot of web revenue is geting translated into EPS (or EPS is getting diluted).
Earnings Per Share (EPS)
| SL | 12 months | EPS | YOY Progress |
|---|---|---|---|
| 1 | 2020 | 0.39 | – |
| 2 | 2021 | 0.13 | -66.67% |
| 3 | 2022 | 3.10 | 2284.62% |
| 4 | 2023 | 1.36 | -56.13% |
| 5 | 2024 | 4.57 | 236.03% |
| – | – | CAGR (5Yrs) | 63.60% |
The EPS (earnings per share) additionally displays a good progress pattern, rising from $0.39 in 2020 to $4.57 in 2024 (CAGR 63%). That’s a strong signal for shareholders, however the variability in margins over time suggests PPC is delicate to exterior elements like commodity costs or regulatory challenges (extra on that later).
The Steadiness Sheet: Stability and Leverage
Subsequent up, let’s peek at PPC’s Steadiness Sheet to know their monetary well being and the way they’re managing belongings, liabilities, and fairness.
| SL | 12 months | Complete Asset | YOY Progress |
|---|---|---|---|
| 1 | 2020 | 7,474.50 | – |
| 2 | 2021 | 8,913.21 | 19.25% |
| 3 | 2022 | 9,255.77 | 3.84% |
| 4 | 2023 | 9,810.36 | 5.99% |
| 5 | 2024 | 10,650.58 | 8.56% |
| – | – | CAGR (5Yrs) | 7.34% |
Property have grown steadily, up 42% from 2020 to 2024. This progress doubtless comes from investments in manufacturing services, acquisitions, or working capital to help their increasing operations. However right here’s the place it will get tough, let’s take a look at their liabilities:
| SL | 12 months | Complete Debt | YOY Progress |
|---|---|---|---|
| 1 | 2020 | 2,570.67 | – |
| 2 | 2021 | 3,571.82 | 38.95% |
| 3 | 2022 | 3,502.63 | -1.94% |
| 4 | 2023 | 3,612.30 | 3.13% |
| 5 | 2024 | 3,466.24 | -4.04% |
| – | – | CAGR (5Yrs) | 6.16% |
Debt spiked in 2021 however has since stabilized, even dropping barely in 2024. Nonetheless, $3.46 billion in debt isn’t pocket change.
After I calculate their debt-to-equity ratio (whole debt divided by whole fairness), right here’s what I get:
| SL | 12 months | D/E |
|---|---|---|
| 1 | 2020 | 1.00 |
| 2 | 2021 | 1.38 |
| 3 | 2022 | 1.23 |
| 4 | 2023 | 1.08 |
| 5 | 2024 | 0.81 |
The debt-to-equity ratio has crept up, that means PPC is relying extra on borrowed cash relative to shareholder fairness. This isn’t essentially a dealbreaker, particularly since their curiosity protection (EBITDA divided by curiosity expense, which isn’t offered however will be inferred) appears to have improved with the 2024 EBITDA margin spike.
Nonetheless, it’s one thing to control, particularly if rates of interest rise or if margins shrink once more.
| SL | 12 months | Complete Debt | YOY Progress |
|---|---|---|---|
| 1 | 2020 | 547.62 | – |
| 2 | 2021 | 427.66 | -21.91% |
| 3 | 2022 | 400.99 | -6.24% |
| 4 | 2023 | 697.75 | 74.01% |
| 5 | 2024 | 2,040.83 | 192.49% |
| – | – | CAGR (5Yrs) | 30.10% |
Whoa, take a look at that money steadiness in 2024. It’s ballooned to over $2 billion, up from $547.62 million in 2020. This provides PPC a pleasant liquidity cushion to climate any storms, pay down debt, or put money into progress. It’s a reassuring signal of economic stability.
The Money Circulation Report: The place’s the Cash Going?
Money circulate is the place the rubber meets the street, it exhibits how effectively an organization generates and manages its money.
| Money Circulation Report (in Mn USD) | 2020 | 2021 | 2022 | 2023 | 2024 |
|---|---|---|---|---|---|
| Money from Operations | 724.25 | 326.46 | 669.86 | 677.88 | 1,990.13 |
| Capital Expenditure | -354.76 | -381.67 | -487.11 | -543.82 | -476.15 |
| Free Money Circulation | 333.65 | -12.96 | 160.9 | 94.48 | 1,467.05 |
| Starting Money Steadiness | 279.8 | 525.95 | 416.35 | 401.28 | 728.9 |
| Ending Money Steadiness | 547.62 | 427.66 | 400.99 | 697.75 | 2,040.83 |
Operational money circulate in 2024 is a blockbuster at $1.99 billion, an enormous enchancment from the $336.46 million low in 2021. This aligns with their improved profitability and suggests they’re working a tighter ship operationally.
PPC has been investing closely in its enterprise, CapEx has hovered round $350–550 million yearly. This may very well be for upgrading services, enhancing effectivity, or increasing capability, which is an efficient signal for long-term progress. Nonetheless, it’s consuming into their free money circulate (FCF).
That’s a wholesome FCF, giving PPC flexibility to pay down debt, situation dividends, or reinvest.
The reported FCF tells the same story, 2024 is a standout yr, whereas 2021 was tough with unfavorable FCF. This volatility is one thing to observe, because it displays how delicate PPC’s money flows are to operational hiccups.
Worth-Associated Knowledge: Is the Inventory a Purchase?
Now, let’s tie this all along with PPC’s present price-related information as of early March 2025:
- Present Worth: $54.78
- P/E (TTM): 11.92
- P/B: 3.03
- P/FCF: 8.76
- Shares Excellent: 237.122 million
- Market Cap: $54.78 × 237.122 million = $12.99 billion (approx.)
The P/E ratio of 11.92 is comparatively low for an organization with a 2024 EPS of $4.57, that’s signal it is perhaps undervalued in comparison with the broader market (the S&P 500 common P/E is often round 20–25).
The P/B ratio of three.03 suggests the market values PPC at 3 times its e book worth, which isn’t loopy excessive however signifies some progress expectations baked into the value.
The P/FCF of 8.76 is especially engaging—FCF is a good metric for valuation, and a low P/FCF suggests the inventory may very well be a discount.
The Greater Image
From a basic perspective, PPC seems to be like a strong contender in 2025. Income progress is regular, profitability is on the upswing (particularly in 2024), and their money place is stronger than ever. The inventory’s valuation metrics additionally recommend it is perhaps undervalued, making it an intriguing choose for worth traders.
However there are dangers to contemplate. The poultry business is notoriously cyclical, with margins delicate to feed prices, client demand, and regulatory pressures. PPC has additionally had authorized troubles up to now, just like the $110.5 million fantastic in 2020 for price-fixing—which raises governance considerations.
Plus, their debt ranges, whereas manageable, may change into a burden if rates of interest climb or if margins shrink once more.
Conclusion
Should you’re desirous about investing in Pilgrim’s Satisfaction, right here’s my two cents, the corporate is in a robust place heading into 2025, with enhancing profitability and a hefty money reserve.
The inventory seems to be fairly priced, particularly with that low P/FCF ratio. However control business headwinds and their debt load.
Should you’re a long-term investor who can abdomen some volatility, PPC is perhaps price a better look. Perhaps begin with a small place and see how they carry out over the following few quarters.
What do you suppose? Are you contemplating PPC to your portfolio, or are you different sectors? Let me know within the feedback, I’d love to listen to your ideas.
And for those who discovered this deep dive useful, share it with a buddy who’s into investing.
Till subsequent time, blissful investing.
