Investors are betting Maple Leaf Foods Inc. (MFI) can rebound from a slump in bakery sales by cutting costs as the food company trades at half the price-earnings value of its peers.
Canada’s second-largest food processor has outperformed the Standard & Poor’s/TSX index this year by 8.6 percentage points even after the stock fell last week due to a drop in bakery sales. Maple Leaf’s price-to-earnings ratio is at an 8.2 percent discount to the S&P/TSX after narrowing from 30 percent Feb. 24, showing increased investor interest, according to data compiled by Bloomberg.
The Toronto-based meat processor and baker may double its price in three years as it consolidates into new plants and updates systems to cut expenses, according to Michael Van Aelst, an analyst at TD Newcrest in Montreal.
“The road will likely not be without some temporary hazards,” Aelst wrote in a note to clients May 3. “We see very good value in a company that, in our view, has significant upside over the next three years.”
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