Why Pilgrims Pride (PPC) Stock is Soaring

Breakthroughs might be catalysts for jaw-dropping profits — but they’re rare, and more often than not, hunting for them is an exercise in futility

Case in point — the food industry. With the most recent frontier in the space — lab grown meat, taking a backseat as products failed to sufficiently penetrate the market, it’s mostly been a case of going back to the old way of doing things.

Here’s the kicker, though — you don’t have to have a paradigm-shifting advancement on your hands to see continued growth. Pilgrims Pride (NASDAQ: PPC) is a perfect example of this.

The company is one of the largest poultry producers in the United States. Although nothing has fundamentally changed in the way it does business, PPC stock has seen year-to-date (YTD) gains of 62.54%. 

Yet its upward ascent may not be over. Per our proprietary quant rating system, this is the top-rated stock in the entire food industry. Stocks that carry a Zen Rating of A tend to provide an annual return of 32.52% — and PPC has delivered almost twice as much.

On October 30, Pilgrims Pride released its Q3 2024 earnings call — marking seven consecutive quarters of beating analyst estimates regarding earnings per share (EPS). And while the stock’s YTD performance is impressive, it’s far from overvalued. In fact, it carries a Value Rating of B.

In what was most likely an instance of profit-taking, prices dropped from $50.04 to $46.16 from December 16 to December 20. After this 7.75% drop, the stock’s price-to-earnings (P/E) ratio sits at just 11.07x — far below the market-wide average of 30.38x and the food industry average of 23.13x.

That isn’t the company’s strongest suite, however — Pilgrims Pride carries a Financials Rating of A — or to put it in simple terms, the company’s balance sheet is enviable. In the last year, profit margins have improved significantly — from just 0.2% to 5.5%. 

Although the debt-to-equity ratio of the poultry producer is considered high at 1.54, five years ago, the ratio stood at 1.84 — so there’s positive progress on that front.

The company’s biggest secret might just be its treasure trove of short-term assets. Valued at $5.06 billion, they’re more than enough to contend with the $2.59 billion in short-term liabilities and $3.89 billion in long-term liabilities.

A lot of this recent growth was caused by supply chain constraints and shortages in the chicken industry. While there is no widespread shortage today, Pilgrims Pride has managed to both profit and remain undervalued — and as it remains a key player in providing cost-effective protein, it is well positioned for further growth in 2025 as beef prices will most likely keep increasing.

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