Diamond Foods (DMND) is aggressively pursuing strategies to grow sales through increased distribution, strong advertising campaigns, and product innovation. The company's disappointing earnings in fiscal 2006 negatively impacted the stock; however, the stock rebounded from depressed valuation levels with the company reporting above expectations earnings for fiscal 2007.
With the stock now fairly valued, a Hold rating is recommended. Headquartered in Stockton, California, Diamond Foods is a specialty food company focused on processing, marketing and distribution of culinary, ingredient, in-shell, and snack nuts under the Diamond of California and Emerald of California brand names. Founded in 1912, Diamond Foods is the U.S. leader in the culinary and in-shell nut category with a 37.4% market share.
Since the company converted from an agricultural cooperative association to a corporation, Diamond Foods does not have a long earnings history. However, the company has a sales growth history with sales having grown at a 13.1% compound annual growth rate (CAGR) over the last five years. Despite having traded for only 34 months, the stock has had a wide forward P/E range of 26 to 40. The target price is $22.50, which is based on a 34 P/E multiple on the 12-month trailing earnings.
Read the analyst note on DMND.
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