JM Smucker Stock To $70?

Our multi-factor assessment suggests that it may be time to sell SJM stock. We have, overall, a pessimistic view of the stock, and a price of $70 may not be out of reach. We believe there are several things to fear in SJM stock given its overall Weak operating performance and financial condition. Hence, despite its Moderate valuation, this makes the stock look Risky.

Below is our assessment:

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Let’s get into details of each of the assessed factors but before that, for quick background: With $11 Bil in market cap, JM Smucker provides branded food and beverage products including coffee, peanut butter, specialty spreads, pet foods, and cooking ingredients under well-known brands.

[1] Valuation Looks Moderate

This table highlights how SJM is valued vs broader market. For more details see: SJM Valuation Ratios

[2] Growth Is Inconsistent

• JM Smucker has seen its top line grow at an average rate of 2.9% over the last 3 years
• Its revenues have grown 2.5% from $8.5 Bil to $8.7 Bil in the last 12 months
• Also, its quarterly revenues declined -0.6% to $2.1 Bil in the most recent quarter from $2.1 Bil a year ago.

This table highlights how SJM is growing vs broader market. For more details see: SJM Revenue Comparison

[3] Profitability Appears Weak

• SJM last 12 month operating income was $1.3 Bil representing operating margin of 15.5%
• With cash flow margin of 11.8%, it generated nearly $1.0 Bil in operating cash flow over this period
• For the same period, SJM generated nearly $-1.5 Bil in net income, suggesting net margin of about -16.8%

This table highlights how SJM profitability vs broader market. For more details see: SJM Operating Income Comparison

[4] Financial Stability Looks Weak

• SJM Debt was $8.1 Bil at the end of the most recent quarter, while its current Market Cap is $11 Bil. This implies Debt-to-Equity Ratio of 75.4%
• SJM Cash (including cash equivalents) makes up $39 Mil of $18 Bil in total Assets. This yields a Cash-to-Assets Ratio of 0.2%

[5] Downturn Resilience Is Strong

SJM has been more resilient than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.

2022 Inflation Shock

• SJM stock fell 33.5% from a high of $162.59 on 6 January 2023 to $108.20 on 13 November 2023 vs. a peak-to-trough decline of 25.4% for the S&P 500.
• The stock is yet to recover to its pre-Crisis high
• The highest the stock has reached since then is $133.74 on 1 February 2024 , and currently trades at $100.38

 
2020 Covid Pandemic

• SJM stock fell 19.4% from a high of $118.86 on 18 March 2020 to $95.79 on 23 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 16 April 2020

 
2008 Global Financial Crisis

• SJM stock fell 46.2% from a high of $63.66 on 29 June 2007 to $34.22 on 11 March 2009 vs. a peak-to-trough decline of 56.8% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 27 July 2010

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