SunOpta has followed the market’s trajectory closely, rising in tandem with the S&P 500 over the past six months. The stock has climbed by 10.5% to $6.50 per share while the index has gained 6.1%.
Is there a buying opportunity in SunOpta, or does it present a risk to your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.
Why Do We Think SunOpta Will Underperform?
We don't have much confidence in SunOpta. Here are three reasons there are better opportunities than STKL and a stock we'd rather own.
1. Revenue Spiraling Downwards
A company’s long-term sales performance is one signal of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Over the last three years, SunOpta’s demand was weak and its revenue declined by 1.6% per year. This was below our standards and signals it’s a low quality business.
2. Fewer Distribution Channels Limit its Ceiling
With $792.4 million in revenue over the past 12 months, SunOpta is a small consumer staples company, which sometimes brings disadvantages compared to larger competitors benefiting from economies of scale and negotiating leverage with retailers.
3. Low Gross Margin Reveals Weak Structural Profitability
At StockStory, we prefer high gross margin businesses because they indicate pricing power or differentiated products, giving the company a chance to generate higher operating profits.
SunOpta has bad unit economics for a consumer staples company, signaling it operates in a competitive market and lacks pricing power because its products can be substituted. As you can see below, it averaged a 15.5% gross margin over the last two years. Said differently, for every $100 in revenue, a chunky $84.48 went towards paying for raw materials, production of goods, transportation, and distribution. 
Final Judgment
We cheer for all companies serving everyday consumers, but in the case of SunOpta, we’ll be cheering from the sidelines. That said, the stock currently trades at 36.6× forward P/E (or $6.50 per share). This multiple tells us a lot of good news is priced in - you can find more timely opportunities elsewhere. Let us point you toward one of our top software and edge computing picks.
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