Taking a closer look at the fundamentals behind LANC
Lancaster Colony Corp. (NASDAQ:LANC) is a manufacturer and marketer of specialty food products for the retail and foodservice markets. Lancaster Colony is the parent company of T. Marzetti Company. Other brands owned by Lancaster Colony Corporation include New York Brand Bakery, Sister Schubert’s and Flatout.
Lancaster Colony stock has increased roughly 29.5% year-over-year, staging a strong rebound off its March 2020, two-year low of $114.55. The stock looks to have plateaued near the $190 level in May, after touching a two-year high of $193.66 early in the month. Lancaster Colony also offers a $3.00 forward dividend, which is equivalent to a dividend yield of 1.60%.
As far as performance in the earnings confessional, Lancaster Colony has outperformed earnings expectations on three of its last four reports released. As a quick review, LANC outperformed expectations by a margin of $0.29 for the second quarter of 2020 with an earnings per share (EPS) of $1.25. Then, LANC missed expectations by a margin of $0.15 for the third quarter of 2020 with an increased EPS of $1.45. Lancaster Colony's earnings rose to to $1.85 per share in the fourth quarter of 2020, beating expectations by a margin of $0.41. Most recently, for the first quarter of 2021, LANC beat expectations by a margin of $0.11, reporting an EPS of $1.35.
In general, Lancaster Colony is performing very well fundamentally. LANC has a great balance sheet with $211.12 million in cash and only $17.21 million in total debt. Furthermore, Lancaster Colony Corporation has consistently grown revenues over the past few years, increasing its top line by 16% since 2017.
LANC has also performed consistently on the bottom-line, with the exception of a 10% net income decline in 2020, likely a direct result of the COVID-19 pandemic. Lancaster Colony's net income is still up by 22.6% since 2017. The only, and the biggest, fundamental issue with LANC is its current stock valuation. Lancaster Colony stock currently trades at a price-earnings ratio of 36.65, which is just too high to justify given the company’s modest growth rates. Overall, investors are likely better off waiting on the sidelines for a better entry point on Lancaster Colony stock.