On Tuesday, Lake Street Capital Markets took a positive stance on shares of Mama's Creations (NASDAQ:MAMA), increasing the stock's price target to $11 from the previous $10, while keeping a Buy rating on the shares. The stock, which has delivered an impressive 142.5% return over the past year according to InvestingPro data, faces construction-related challenges that have affected its gross margins, EBITDA, and EPS.
Current analyst targets range from $10 to $14, suggesting potential upside despite the stock trading near its 52-week high of $9.98. Despite these headwinds, the analyst believes the core investment thesis for Mama's Creations remains unchanged.
The margin pressures were mainly due to a one-time expense associated with the construction of a capital expenditure project, which is expected to double the company's grilled chicken production capacity. While the analyst highlighted 10% revenue growth, InvestingPro data shows even stronger performance with 17.81% revenue growth in the last twelve months.
The growth was particularly driven by a 90% increase in volume from both new and existing customers. The company maintains a strong financial position with a current ratio of 1.37, indicating sufficient liquidity to meet short-term obligations.
This growth is seen as a testament to the company's successful one-stop-shop deli solutions strategy and its ability to outperform the overall industry growth. The positive macro trends are also seen as a supportive factor for the company's business model.
Despite a recent 18% decline in share price to below $8 in after-hours trading on Monday, the analyst remains optimistic about the company's revenue momentum and its $1 billion revenue target.
The analyst's confidence in the company's strategy and market position has led to the decision to reiterate a Buy rating and increase the price target to $11, which is based on a revenue multiple. The analyst's comments reflect a belief that investors are likely to pay a premium for Mama's Creations shares given the company's significant growth opportunities and ongoing revenue momentum.
According to InvestingPro, the company currently trades at elevated multiples with a P/E ratio of 69.93, suggesting investors are pricing in substantial growth expectations. InvestingPro subscribers can access 15+ additional valuable insights and a comprehensive Pro Research Report, which provides detailed analysis of the company's valuation metrics and growth potential.
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