SJM At Price Support Zone, Right Time To Buy?
JM Smucker (SJM) should be on your watchlist. Here is why – it is currently trading in the support zone ($104.98 – $116.04), levels from which it has bounced meaningfully before. In the last 10 years, the stock received buying interest at this level 6 times and subsequently went on to generate 17.9% in average peak returns.
| Peak Return | Days to Peak Return | |
|---|---|---|
| 8/25/2020 | 7.0% | 155 |
| 3/5/2021 | 18.9% | 91 |
| 9/24/2021 | 8.0% | 47 |
| 11/10/2021 | 15.0% | 183 |
| 5/23/2022 | 35.4% | 228 |
| 11/29/2023 | 23.2% | 64 |
But is the price action enough alone? It certainly helps if the fundamentals check out. For SJM Read Buy or Sell SJM Stock to see how convincing this buy opportunity might be.
Here are some quick data points:
- Revenue Growth: 2.5% LTM and 2.9% last 3 year average.
- Cash Generation: Nearly 7.7% free cash flow margin and 15.5% operating margin LTM.
- Recent Revenue Shocks: The minimum annual revenue growth in last 3 years for SJM was -4.1%.
- Valuation: SJM trades at a PE multiple of -8.1
- Opportunity vs S&P: Compared to S&P, you get lower valuation, lower revenue growth, and lower margins
JM Smucker provides branded food and beverage products including coffee, peanut butter, specialty spreads, pet food, and cooking ingredients under well-known consumer brands.
| SJM | S&P Median | |
|---|---|---|
| Sector | Consumer Staples | – |
| Industry | Packaged Foods & Meats | – |
| PE Ratio | -8.1 | 24.0 |
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| LTM* Revenue Growth | 2.5% | 5.1% |
| 3Y Average Annual Revenue Growth | 2.9% | 5.2% |
| Min Annual Revenue Growth Last 3Y | -4.1% | -0.3% |
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| LTM* Operating Margin | 15.5% | 18.6% |
| 3Y Average Operating Margin | 16.2% | 17.8% |
| LTM* Free Cash Flow Margin | 7.7% | 13.1% |
*LTM: Last Twelve Months
That is one way to look at stocks. Trefis High Quality Portfolio evaluates much more, and is designed to reduce stock-specific risk while giving upside exposure
What Is Stock-Specific Risk If The Market Crashes?
That said, SJM isn’t immune to downturns. It fell about 40% in the Dot-Com Bubble and nearly 38% during the Global Financial Crisis. The 2018 Correction and Inflation Shock hit around 31-32%. Even the Covid selloff pulled it down almost 20%. Solid fundamentals don’t eliminate risk. When markets tumble, even steady stocks can take a serious hit.
The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, 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. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.