Is This Small Cap Stock Still a Buy?

MGP Ingredients, Inc. (NASDAQ:MGPI) is a producer and supplier of distilled spirits and specialty wheat, proteins, and starches. In other words, they're a big player in the alcohol industry.

MGP Ingredients will report first-quarter earnings on Wednesday, May 5. MGP Ingredients is expected to release its financial results before the market opens that morning. In 2020, MGPHI outperformed earnings expectations on all four of the quarterly reports released. However, the post earnings reactions tell a different story.

Besides a post-earnings bull gap of 6.9% back in October, the other seven of MGPI's post-earnings reactions in the last eight quarters have been to the negative. This includes a 4.4% drop back in February, and a 22.5% drop back in May 2019.

On the charts, MGPI is up 29% in 2021, but has pulled back from its Feb. 25 annual high of $71.95. The good news is this pullback has so far been contained by the shares' ascending 80-day moving average. The company also offers a $0.48 forward dividend, which is equivalent to a dividend yield of 0.77%.

From a fundamental perspective, MGP Ingredients stock is slightly overvalued at the moment, which is evident by its price-earnings ratio 26.13. However, MGPI has potential as a long-term play, especially at a small market cap of $1.36 billion. In 2020, MGP Ingredients increased revenues by 9% and net income by 4%. Furthermore, the company has just $45 million in total debt. Aside from valuation, the biggest concern with MGPI is its low cash balance of $21.66 million.