Is Costa Group’s share price decline cyclical or structural?
One of the more significant de-rating stories over the past 12 months has been that of fruit and vegetable grower Costa Group (ASX:CGC), which has had to issue two earnings downgrades over this period due to a variety of weaker pricing and agricultural-related issues.
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hi Joseph, thkaks for the artcile. What I understand is the rerating of the share price is due to the cyclical nature than structutral. Waht is your take on value of the share is it in the buy zone?
There are certainly cyclical elements of the share price decline – however the nature of its business means Costa faces a more volatile earnings profile in any given year due to the impact of agricultural factors outside of their control. As I have tried to outline in the article, the market’s confidence in paying a higher multiple for this earnings stream and future growth has taken a hit – at least temporarily – although that’s not to say the collective confidence can’t / won’t return in future.
While I am unable to give a recommendation, the company is in an interesting position as it edges closer to harvesting the increased production from its years of investment (mushrooms, international berries, avocados, tomatos) – assuming they control the “controllables”.
thank you for this comments. Well said