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Fresh Del Monte: Deep Value Winner, With Sustainable 5% Cash Yield

Core Viewpoint - Fresh Del Monte Produce Inc (FDP) is currently undervalued, with its enterprise value of $1.41 billion being lower than its tangible book value of $1.48 billion, presenting a strong buying opportunity for investors [3][12][35] Valuation Metrics - The market capitalization of Fresh Del Monte Produce is approximately $1.03 billion, while its tangible book value stands at $1.477 billion, indicating a significant discount [4][15] - The price-to-trailing cash flow multiple is at 5.7x, which is cheaper than 90% of the time since the Great Recession [5][27] - The enterprise value to revenue ratio is 0.328, and the forward ratio is 0.323, both of which are historically low [7][27] Dividend and Cash Flow - The company has raised its annual dividend to $1.00, yielding 4.7% on a forward basis, which is significantly higher than the S&P 500's yield of 1.23% [20][29] - The free cash flow yield is currently at 11.7%, indicating strong cash generation capabilities [19][28] Earnings and Growth Potential - Earnings per share (EPS) for 2024 is estimated at $1.94, with a projected increase to $2.49 in 2025, reflecting a growth rate of 28.09% [22][31] - The company has potential for profit margin improvement, as current gross and operating margins are below historical levels [22][32] Market Position and Strategy - Fresh Del Monte Produce is positioned as a food inflation hedge, with the ability to pass on rising costs to consumers, potentially increasing EPS by 20% to 30% with a 10% price increase in fresh produce [22][31] - The company operates with low debt levels, with trailing free cash flow of $120 million against net interest expenses of $20 million, providing financial stability [22][31] Investment Outlook - The stock is currently trading at a 50% discount to its estimated asset liquidation value of $40 per share, suggesting significant upside potential [12][35] - Analyst estimates indicate a potential price target of $30 to $40 per share within 12-18 months, representing a total return of 100% for current investors [34][35]