Why Lancaster Colony Stock Has Yet to Hit Bottom

The equity carries a more than 26% year-to-date deficit

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Lancaster Colony Corp. (NASDAQ:LANC), better known as the parent company of Marzetti, is down 1.2% to trade at $121.81 this afternoon. The food name announced a quarterly cash dividend of 80 cents per share on May 19, which will be payable on June 30 to shareholders of record as of June 9. With this announcement, LANC now offers a forward dividend of $3.20, at a dividend yield of 2.60%, and marks its 59th consecutive year of cash dividend increases. 

On the charts, Lancaster Colony stock has been testing a floor at the $120 level for roughly two weeks, after struggling with overhead pressure from the 10-day moving average since April. The security has seen several bear gaps so far this year, which have culminated in a May 20, two-year low of $118.99, and contributed to its 26.6% year-to-date deficit. 

LANC 10 Day

Short-term options traders have been extremely put-biased. This is per the security's Schaeffer's put/call open interest ratio (SOIR) of 2.25, which ranks above 95% of all other annual readings. 

LANC may experience even more downside as it continues to correct its valuation. At a forward price-earnings ratio of 18.48 and a price-sales ratio of 2.08, the stock can still be considered overvalued, given the company’s modest sales growth rate and struggle to produce consistent earnings growth.

Lancaster Colony is estimated to increase its revenues 11.4% in 2022, but is also expected to have its growth rate reduced to just 5.9% for 2023. In addition, the food business is estimated to see a 26.6% decline in earnings for 2022, with only an 8.3% expected recovery for 2023. In general, Lancaster Colony stock has little to offer its investors, aside from a decent dividend yield and a long history of dividend growth.

 

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