Financial Analysis: Sanderson Farms (SAFM) and Pilgrim’s Pride Corporation (PPC)

Sanderson Farms (NASDAQ: SAFM) and Pilgrim’s Pride Corporation (NASDAQ:PPC) are both mid-cap consumer staples companies, but which is the superior stock? We will compare the two companies based on the strength of their risk, profitability, earnings, analyst recommendations, institutional ownership, dividends and valuation.

Insider & Institutional Ownership

26.0% of Pilgrim’s Pride Corporation shares are owned by institutional investors. 5.7% of Sanderson Farms shares are owned by company insiders. Comparatively, 78.8% of Pilgrim’s Pride Corporation shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Profitability

This table compares Sanderson Farms and Pilgrim’s Pride Corporation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Sanderson Farms 7.34% 18.30% 15.28%
Pilgrim’s Pride Corporation 6.05% 49.65% 14.88%

Volatility and Risk

Sanderson Farms has a beta of 0.62, indicating that its share price is 38% less volatile than the S&P 500. Comparatively, Pilgrim’s Pride Corporation has a beta of 0.19, indicating that its share price is 81% less volatile than the S&P 500.

Analyst Recommendations

This is a summary of current recommendations and price targets for Sanderson Farms and Pilgrim’s Pride Corporation, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Sanderson Farms 1 4 4 0 2.33
Pilgrim’s Pride Corporation 0 2 3 0 2.60

Sanderson Farms presently has a consensus price target of $120.22, indicating a potential downside of 14.45%. Pilgrim’s Pride Corporation has a consensus price target of $23.33, indicating a potential downside of 17.17%. Given Sanderson Farms’ higher probable upside, equities analysts clearly believe Sanderson Farms is more favorable than Pilgrim’s Pride Corporation.

Dividends

Sanderson Farms pays an annual dividend of $0.96 per share and has a dividend yield of 0.7%. Pilgrim’s Pride Corporation does not pay a dividend. Sanderson Farms pays out 9.9% of its earnings in the form of a dividend.

Earnings and Valuation

This table compares Sanderson Farms and Pilgrim’s Pride Corporation’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Sanderson Farms $3.01 billion 1.06 $430.18 million $9.74 14.43
Pilgrim’s Pride Corporation $8.21 billion 0.85 $1.00 billion $1.99 14.16

Pilgrim’s Pride Corporation has higher revenue and earnings than Sanderson Farms. Pilgrim’s Pride Corporation is trading at a lower price-to-earnings ratio than Sanderson Farms, indicating that it is currently the more affordable of the two stocks.

Summary

Sanderson Farms beats Pilgrim’s Pride Corporation on 9 of the 16 factors compared between the two stocks.

About Sanderson Farms

Sanderson Farms, Inc. is a poultry processing company. The Company is engaged in the production, processing, marketing and distribution of fresh and frozen chicken, and also preparation, processing, marketing and distribution of processed and minimally prepared chicken. It sells ice pack, chill pack, bulk pack and frozen chicken, in whole, cut-up and boneless form, under the Sanderson Farms brand name to retailers, distributors, casual dining operators, customers reselling frozen chicken into export markets. The Company, through its subsidiaries, Sanderson Farms, Inc. (Production Division) and Sanderson Farms, Inc. (Processing Division), conducts its chicken operations. Sanderson Farms, Inc. (Production Division) is engaged in the production of chickens to the broiler-stage. Sanderson Farms, Inc. (Foods Division) is engaged in the processing, sale and distribution of chickens. The Company, through Sanderson Farms, Inc. (Foods Division), conducts its prepared chicken business.

About Pilgrim’s Pride Corporation

Pilgrim’s Pride Corporation is a retail feed store. It is a producer and seller of chicken with operations in the United States, Mexico and Puerto Rico. It is engaged in the production, processing, marketing and distribution of fresh, frozen and value-added chicken products to retailers, distributors and foodservice operators. It offers a range of products to its customers through national and international distribution channels. Its fresh chicken products consist of refrigerated (non-frozen) whole chickens, whole cut-up chickens and selected chicken parts that are either marinated or non-marinated. Its prepared chicken products include ready-to-cook and individually frozen chicken parts, strips, nuggets and patties, some of which are either breaded or non-breaded and either marinated or non-marinated. As of December 25, 2016, the Company marketed its portfolio of fresh, prepared and value-added chicken products across the United States, Mexico and in approximately 80 other countries.

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