Oil-Dri Corporation of America: Value Creation Continues Even As Shares Pull Back

Core Insights - Oil-Dri Corporation of America reported a revenue of $323.9 million for the first nine months of the 2024 fiscal year, marking a 6% increase from $305.6 million in the same period last year, attributed to higher product prices and an improved product mix, despite a decline in overall volumes [1][2] - The company acquired Ultra Pet for $46 million, entering the crystal cat litter segment, which has seen significant growth with industry sales reaching $296 million in the past year, up from $61 million four years ago, reflecting an annualized growth rate of 48.4% [2] - Net income for the first nine months of 2024 was $30.9 million, up from $17.6 million a year earlier, with EBITDA increasing from $35.5 million to $52.6 million [2][4] Financial Performance - The Business to Business Products Group generated $111.6 million in revenue, a 7% increase from $104.3 million year-over-year, driven by a 23% sales increase in fluid purification products [5] - The Retail and Wholesale Products Group also saw revenue growth, climbing from $201.4 million to $212.3 million, supported by higher prices on cat litter products [5] - Adjusted operating cash flow increased from $33.8 million to $44.5 million, while EBITDA is projected to expand from $52.7 million to $78.1 million if current trends continue [2][5] Market Position - Despite a 9.3% decline in stock price since December, shares have appreciated 145.7% since the initial coverage in August 2022, outperforming the S&P 500's 35.2% increase during the same period [4][10] - The company is considered attractively priced, with a price-to-earnings ratio of 9.2, which is lower than most comparable firms, indicating potential undervaluation [6][12] - The management's strategic acquisition and focus on growth areas like crystal cat litter suggest a positive outlook for the company's future performance [2][10]