B&G Foods (BGS): A Less-Known Stock with Solid Returns

B&G Foods (NYSE:BGS) has been impressing investors with a solid growth in sales and earnings over the last couple of years. The company’s revenue growth was standing around 15% in the last three years, supported by its aggressive expansion plans and innovations. B&G Foods Inc & its subsidiaries manufacture, sell & distribute a portfolio of branded shelf-stable foods across the United States, Canada & Puerto Rico.

On the other hand, the company also offers a strong dividend yield of 4.39%, when the industry average is hovering around 2.2%. BGS has recently increased its quarterly dividend by 10% to $0.46 per share, a 49th successive growth in quarterly dividends. The double-digit growth in divided symbolizes the management’s confidence in its future business fundamentals and cash generation potential.

After hitting 52 weeks high of $50 a share, BGS stock plummeted almost 9.62% in the last three months. Albeit the recent selloff, B&G Foods stock price is still up almost 22% since the start of this year. The latest selloff in its share price was driven by a decline in its base business. The company’s base business net sales decreased 3.7% to $204.5 million in the third quarter compared with the year-ago period, due to a 2.8% decline in volumes and a decrease in net pricing of 0.9%.

Aside from lower results from base business, B&G Foods generated consolidated sales growth of 49.2% to $318.2 million for the third quarter, compared with sales of $213.3 million in the same period last year. B&G’s net income surged 63% to $32.4 million over the prior year period, supported by solid growth in gross margins.

The company has been working on aggressive growth measures through acquisitions and investments in growth opportunities. It recently acquired spices and seasonings business of ACH Food Companies, which is immediately accretive to its EPS and free cash flow.

The latest acquisition of spices and seasonings business will add annualized basis net sales of around $220M. In addition, the company has also completed the acquisition of Green Giant to expand its penetration in the markets. Overall, the company is likely to generate a massive growth in sales and earnings on the back of recent acquisitions. Thus, buying BGS shares on the dip could be a wise strategy.

The author does not have any positions in the above mentioned companies.

Alexander is an analyst for EconomicCalendar.com who specializes in index and commodity trading. His outlook is usually near-term to medium-term. He has over 10 years of experience in the financial industry and began his career at the dealing desk. Alexander holds a Bachelor’s degree in Economics from University of Delaware.