Premier Foods have not been immune to the volatility around the Ukraine crisis and shares dipped, only to be quickly bought into by investors targeting the reliable cashflows from their portfolio of household brands.
Trading at 111p, Premier Foods currently has a forward PE ratio of 9.7, meaning their shares are undervalued compared to peers given the positive outlook for the company.
The company’s current PE ratio is 10.3, indicating analysts are forecasting their earnings will rise in the coming financial year.
With Premier Foods shares declining from 52-week highs at 127p to trade at 111p, the company presents the best value of the food producer sector, on a price-to-earnings basis.
The FTSE 350 Food Producer sector has a mean Forward PE Earnings multiple of 15x suggesting Premier Foods shares would need to rise by 50% to trade in line with the sector average.
Premier Foods ‘Exceedingly Good’ Outlook
The group has suffered under the impact of Covid-19, with the food producer noting its H1 2022 6.1% decrease in branded revenue as a result of the lapping effect of pandemic-related volumes.
Premier Foods reported a decrease in revenue to £394.1 million against £421.5 million in its H1 results for 2022 and an adjusted pre-tax profit of £46.4 million compared to £47.7 million in 2020.
However, activity picked up in Q3 with Mr Kipling cakes recording their best ever Christmas trading period with group market share growing 90 basis points and sales for the period up 7% on two years ago.
Premier Foods to raised their outlook to an expected trading profit of £145 million and an adjusted pre-tax profit of £125 million for its FY 2022.
With a market cap of just £960m and the multiples outlined above, Premier Foods shares may be worth putting on a watchlist.