Brasil Foods SA (
BRFS
,
quote
) is an attractive value investment. Emerging market investors can
use it to profit from the current rise in the price of corn, caused
by
the drought in the Midwest
farm belt of the United States, which provides 40% of the world's
corn.
[caption id="attachment_53369" align="alignright" width="300"
caption="Rising corn prices are making Brasil Foods a good value
investment."]
[/caption]
Brasil Foods is a meat products company headquartered in Itajai,
Brazil. Companies in this sector have been pounded like a steak
being tenderized due to the rising price of feed corn.
Year to date, the exchange traded fund for corn, Teucrium
Corn (
CORN
,
quote
) is up 14.41%. The last month of market action has witnessed
a rise of more than 35% in the share price of CORN. Based on
technical indicators, it appears as if prices will continue rising
for CORN and others on the sell side for corn.
The share price of Brasil Foods tells the same story, except
from the buy side. Year to date, Brasil Foods is down almost 30%.
For the last month of market action, it has fallen 12.14%. The
chart below showing the trajectory of the share prices for each
tells the tale. It is a story of the trend not being the friend of
shareholders in Brasil Foods. The stock price is well below the
20-day, 50-day and 200-day moving averages, and is very close to
its 52-week low.
A heat wave has hurt this year's corn yield and is expected
to raise food prices around the world.
The financials for Brasil Foods are as strong as the share
performance has been weak. Earnings-per-share growth this year is
up by 71.03%. The price-to-book ratio is under 1 at just 0.91.
Enhancing the appeal for value investment is the price-to-sales
ratio of 0.96. Growth investing is strong with a price-to-growth
ratio of 0.91. Another positive indicator is a miniscule short
float of only 0.96%.
The future for Brasil Foods is bullish. Earnings-per-share
growth is expected to rise by 31.03% for the next year, and by
around 20% for the next five years. Now trading around $13.90 a
share, the mean analyst target price over the next year is $18.63.
The more the U.S. drought
increases the price of corn
and causes Brasil Foods to fall, the greater the profits when it
rebounds. Corn will not increase in price forever, but this value
investment will recover in the future.
