Why You Should Buy Nomad Foods (NOMD) Stock Right Now

It goes without saying that the food industry has been suffering from lower sales for the last few quarters. Much of the sales debacle can be attributed to the changing eating pattern of consumers and their evolving preference for healthy, fresh and organic food products. Again, the industry has been grappling with other challenges like stiff competition, weak margins and aggressive promotional environment.

That said, overlooking the industry will not be prudent as there are several companies with a decent performance history and strong fundamentals, signaling at a profitable investment opportunity. After all, year-end seasonal factors will continue to drive stocks higher.

Nomad Foods Ltd. (NYSE:NOMD) is one such company that continues to show strength in a number of areas and adding the stock to your portfolio should not be a disappointment. So far this year, Nomad Foods’s shares have skyrocketed more than 71% against the industry’s loss of 4.9%. Also, the company, engaged in the manufacturing and distribution of frozen food items, primarily in the U.K., Italy, Germany, Sweden, France and Norway, outperformed the industry in all the other time frames we considered – 4-week, 12-week and 52-week.

In fact, the Zacks Consensus Estimate for current-year and next-year earnings have moved north by 1.8% and 3.1%, respectively, over the last 30 days. This bullish sentiment of analysts justifies the stock’s current Zacks Rank #2 (Buy) and why we are expecting it to outperform in the near term. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

What Makes Nomad Foods a Solid Bet

Stellar Performance and Upbeat Views: The company has been witnessing robust performance buoyed by strong organic revenue growth and favorable category performance coupled with market share gains. This momentum is underpinned by a strong balance sheet and a portfolio of market-leading brands. Again, the company has impressive growth prospects within European frozen foods market and beyond.

In the last reported quarter, Nomad Foods reported 5.9% organic revenue growth, representing a third consecutive quarter of organic revenue growth and market share expansion. Notably, the company’s U.K. business (largest market) returned to growth in the third quarter following few consecutive quarters of declines. It experienced stellar growth in 10 of its 13 core countries, including the U.K.

In the first nine months of 2017, the company registered organic revenue growth of 3.3%, driven by 2.6% growth in volume/mix and 0.7% growth in price. Gross margin expanded 10 basis points year over year.

Following the company’s first three quarters, Nomad Foods raised its outlook for 2017. The company now expects organic sales growth of 3% against low-single-digit organic growth expected earlier. The company also raised its 2017 adjusted EBITDA guidance to the range of approximately €325-€327 million against the prior expectation of approximately €320-€325 million. Gross margin is expected to be above 2016, with Q4 expected to show strong year-over-year improvement.

Impressive Expected Earnings & Revenue Growth: The year 2017 has been a good year for Nomad Foods and the company remains positive given the prospects of its business in 2018 and beyond.

The company’s earnings for 2017 are expected to increase 22.8% year over year, comfortably outpacing the industry’s average projected growth of 6.9%. The company’s projected sales growth is a healthy 6.8%, higher than the industry average of 1.3%.

The company’s EPS growth is expected to increase 18.1% the next year on 1.8% growth in revenues.

Reasonably Valued Stock: The company currently has a trailing 12-month Price-to-Earnings or P/E ratio of 17.2. This is quite cheap compared with the industry as well as the market at large, as the current P/E for the industry and S&P 500 is at 22.2 and 21.5, respectively. Its lower-than-market positioning calls for an upside in the quarters ahead.

Again, the company’s trailing 12-month Price-to-Sales or P/S ratio of 1.32 is lower than the industry’s 1.97x as well as S&P 500’s 3.41x.

Other Stocks to Consider

You can consider a few other top-ranked stocks in the same space.

Conagra Brands Inc. (NYSE:CAG) carries a Zack Rank #2. Its earnings are expected to grow 9.2% in this year and 8.7% the next.

Medifast, Inc. (NYSE:MED) , a Zack Rank #2 stock, is expected to witness 14.8% growth in earnings this year and 19.8% for the next.

United Natural Foods, Inc. (NASDAQ:UNFI) also carries a Zacks Rank #2. Its earnings are expected to grow 6.8% this year and 7.3% in the next.

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United Natural Foods, Inc. (UNFI): Free Stock Analysis Report

Conagra Brands Inc. (CAG): Free Stock Analysis Report

MEDIFAST INC (MED): Free Stock Analysis Report

Nomad Foods Limited (NOMD): Free Stock Analysis Report

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