Lamb Weston trades at $51.95 per share and has stayed right on track with the overall market, gaining 12.2% over the last six months. At the same time, the S&P 500 has returned 8.3%.
Is now the time to buy Lamb Weston, or should you be careful about including it in your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.
Why Is Lamb Weston Not Exciting?
We don’t have much confidence in Lamb Weston. Here are three reasons we avoid LW, plus one stock we’d rather own.
1. Slow Organic Growth Suggests Waning Demand In Core Business
When analyzing revenue growth, we care most about organic revenue growth. This metric captures a business’s performance excluding one-time events such as mergers, acquisitions, and divestitures as well as foreign currency fluctuations.
The demand for Lamb Weston’s products has been stable over the last eight quarters but fell behind the broader sector. On average, the company has posted feeble year-on-year organic revenue growth of 1.3%.
2. Revenue Projections Show Stormy Skies Ahead
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect Lamb Weston’s revenue to drop by 1.4%. This projection is underwhelming and indicates its products will face some demand challenges.
3. EPS Trending Down
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Sadly for Lamb Weston, its EPS declined by 33% annually over the last three years while its revenue grew by 7.3%. This tells us the company became less profitable on a per-share basis as it expanded.
Final Judgment
Lamb Weston isn’t a terrible business, but it doesn’t pass our quality test. That said, the stock currently trades at 17.3× forward P/E (or $51.95 per share). Investors with a higher risk tolerance might like the company, but we don’t really see a big opportunity at the moment. We’re fairly confident there are better stocks to buy right now. Let us point you toward a dominant aerospace business that has perfected its M&A strategy.
Stocks We Like More Than Lamb Weston
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