Some big hitters like Alphabet (GOOG), IBM (IBM), Intel (INTC), and PepsiCo (PEP) reported earnings late last week, and we are seeing some major themes emerge during this earnings season. Specifically, many companies are beating 1Q25 estimates but cutting or pulling guidance for the full year.
Opportunities to buy quality businesses at undervalued prices are rising given the disconnect between past performance and future expectations.
Our readers know we go into detail explaining the themes and opportunities we’re seeing in our Earnings Watch Parties. We uncover the truth that is hidden behind company filings and press releases.
The diligent work that goes into analyzing all the information in a 200+ page filing is how our Stock Ratings drive alpha in the any market.
By leveraging our superior fundamental research, we’ve identified one such opportunity and featured it as this week’s Long Idea.
Below, we present a large excerpt from our latest Long Idea report published this week, available to Pro and Institutional members. You can buy the full report a la carte here.
We’re not giving you the ticker for this pick, but we are happy to share our hard work because we want you to see how good our research is.
This stock offers favorable Risk/Reward based on the company’s:
- growing sales across all business segments,
- rising chicken and pork demand,
- best in class profitability, and
- cheap stock valuation.
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Chicken Demand Overtakes Beef
Chicken has steadily gained popularity over the last couple of decades, with the chicken consumption per capita in the U.S. rising from 28 pounds in 1960 to 103 pounds in 2024. Growth in chicken consumption has come largely at the expense of beef consumption, which, per capita, fell from 63 pounds in 1960 to 59 pounds in 2024. As a result, in the U.S., chicken is the most consumed protein.
Figure 1: Chicken and Beef Consumption per Capita in the U.S. From 1960 to 2024
Sources: The National Chicken Council
Quality Fundamentals Across Decades
This company has capitalized on the growing demand for chicken, and despite not being a flashy high-growth company, has grown its top- and bottom-line for more than two decades.
The company has grown revenue by 11% and net operating profit after-tax (NOPAT) by 12% compounded annually since 1998.
The company improved its NOPAT margin from 5% in 1998 to 8% in 2024 while invested capital turns fell from 2.5 to 2.1 over the same time. Rising NOPAT margins are enough to offset falling invested capital turns though, and, drive return on invested capital (ROIC) from 13% in 1998 to 17% in 2024.
Additionally, the company’s Core Earnings grew 14% compounded annually from $51 million in 1998 to $1.4 billion in 2024.
Figure 6: Revenue and NOPAT Since 1998
Sources: New Constructs, LLC and company filings
More recently, this company has grown revenue 9% compounded annually over the past five years while NOPAT has grown 22% compounded annually over the same time.
…there’s much more in the full report. You can buy the report a la carte here.
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