Would You Still Hold Lamb Weston Stock If It Fell Another 30%?
Lamb Weston (LW) stock is down 30% in the past year. The slide reflects renewed concerns around softer margins and pricing pressure in its frozen potato products, but sharp drops like this often raise a tougher question: is the weakness temporary, or a sign of deeper cracks in the story?
Before judging its downturn reslience, let’s look at where Lamb Weston stands today.
- Size: Lamb Weston is a $6.1 Bil company with $6.5 Bil in revenue currently trading at $43.51.
- Fundamentals: Last 12 month revenue growth of 2.3% and operating margin of 12.4%.
- Liquidity: Has Debt to Equity ratio of 0.65 and Cash to Assets ratio of 0.01
- Valuation: Lamb Weston stock is currently trading at P/E multiple of 15.5 and P/EBIT multiple of 8.3
- Has returned (median) 7.9% within a year following sharp dips since 2010. See LW Dip Buy Analysis.
These metrics point to a Weak operational performance, alongside Low valuation – making the stock Risky. For details, see Buy or Sell LW Stock
That brings us to the key consideration for investors worried about this fall: how resilient is LW stock if markets turn south? This is where our downturn resilience framework comes in. Suppose LW stock falls another 20-30% to $30 – can investors comfortably hold on? Turns out, the stock has fared worse than the S&P 500 index during various economic downturns, based on (a) how much the stock fell and, (b) how quickly it recovered. Below, we dive deeper into each such downturn.
2022 Inflation Shock
- LW stock fell 41.8% from a high of $85.80 on 5 March 2021 to $49.96 on 14 March 2022 vs. a peak-to-trough decline of 25.4% for the S&P 500.
- However, the stock fully recovered to its pre-Crisis peak by 31 October 2022
- Since then, the stock increased to a high of $115.12 on 4 July 2023 , and currently trades at $43.51
| LW | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -41.8% | -25.4% |
| Time to Full Recovery | 231 days | 464 days |
2020 Covid Pandemic
- LW stock fell 53.1% from a high of $95.87 on 18 February 2020 to $45.01 on 18 March 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
- However, the stock fully recovered to its pre-Crisis peak by 5 January 2023
| LW | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -53.1% | -33.9% |
| Time to Full Recovery | 1,023 days | 148 days |
2018 Correction
- LW stock fell 29.3% from a high of $83.35 on 13 November 2018 to $58.97 on 18 June 2019 vs. a peak-to-trough decline of 19.8% for the S&P 500.
- However, the stock fully recovered to its pre-Crisis peak by 18 November 2019
| LW | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -29.3% | -19.8% |
| Time to Full Recovery | 153 days | 120 days |
Feeling jittery about LW stock? Consider portfolio approach.
Stock Picking Falls Short Against Multi Asset Portfolios
Markets move differently but a mix of assets smooths volatility. A multi asset portfolio keeps you invested and reduces the impact of sharp drops in any single area.
The asset allocation framework of Trefis’ Boston-based, wealth management partner yielded positive returns during the 2008-09 period when the S&P lost more than 40%. Our partner’ strategy now includes Trefis High Quality Portfolio, which has a track record of comfortably outperforming its benchmark that includes all 3 – the S&P 500, S&P mid-cap, and Russell 2000 indices