Under $10 Health Food Company With Solid Financials

The latest data shows signs of inflation cooling down. The food index increased 0.6% sequentially in October after a 0.8% increase in September. The food-at-home index rose 0.4% in October, registering the smallest monthly increase since December 2021.

US Food Inflation

Source: Trading Economics

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Over the recent past, packaged foods have grown in significance due to their easy-to-handle characteristics and hygienic properties. The global packaged food market is expected to reach $4.11 trillion by 2028, growing at a 4.5% CAGR. The market is also concurrently witnessing increased consumption of dairy products.

Packaged food company Lifeway Foods, Inc. (LWAY) produces and markets probiotic-based products internationally. Its primary product is drinkable kefir, a cultured dairy product. The company sells its products under the Lifeway and Fresh Made brand names and private labels.

The stock has gained 34.9% over the past year and 54.6% year-to-date to close its last trading session at $7.11. It is up 29.5% over the past month.

LWAY Chart

Source: TradingView

Here are the factors that could influence LWAY’s performance in the upcoming months:

Probiotics Market Growth

Probiotics are microbial species that support intestinal health in humans and animals. As consumers become more and more health conscious, the probiotics market is expected to expand. The global probiotics market is projected to reach $74 billion by 2030, expanding at 8.5% CAGR.

Solid Financials

For the fiscal third quarter that ended September 30, LWAY’s net sales increased 29.1% year-over-year to $38.14 million. Julie Smolyansky, LWAY's President and Chief Executive Officer, attributed this quarter's results to its core Lifeway Kefir business.

Its gross profit rose 8.5% from the prior-year quarter to $7.59 million. Its net income improved 104.8% year-over-year to $983 thousand. Its earnings per common share came in at $0.06, up 100% from the prior-year period.

Mixed Valuation

Regarding its forward P/E, LWAY is trading at 88.88x, 317% higher than the industry average of 21.31x. The stock’s forward EV/EBIT multiple of 61.61 is 281.9% higher than the industry average of 16.13.

On the other hand, in terms of forward EV/Sales, it is trading at 0.75x, 55.4% lower than the industry average of 1.67x. Its forward Price/Sales multiple of 0.76 is 36.5% lower than the industry average of 1.20.

Favorable Analyst Estimates for Next Year

The consensus EPS estimate of $0.38 for the next year (fiscal 2023) indicates a 375% year-over-year improvement. Likewise, the consensus revenue estimate for the same year of $152 million reflects an increase of 5% from the prior year. Analysts expect LWAY’s EPS to grow 10% per annum over the next five years.

Technical Indicators Look Promising

MarketClub’s Trade Triangles show that LWAY has been trending UP for two of three periods. The long-term trend has been UP since August 12, 2022, and the intermediate-term trend has been UP since November 7, 2022. However, the short-term trend has been DOWN since November 23, 2022.

LWAY Chart

Source: MarketClub

The Trade Triangles are our proprietary indicators, comprised of weighted factors that include (but are not necessarily limited to) price change, percentage change, moving averages, and new highs/lows. The Trade Triangles point in the direction of short-term, intermediate, and long-term trends, looking for periods of alignment and, therefore, strong swings in price.

In terms of the Chart Analysis Score, another MarketClub proprietary tool, LWAY scored +85 on a scale from -100 (strong downtrend) to +100 (strong uptrend). This indicates short-term weakness, but traders could look for the longer-term bullish trend to resume. Traders should continue to monitor the trend score and utilize a stop order.

Chart Analysis Score

Click here to see the latest Score and Signals for LWAY.

What's Next for Lifeway Foods, Inc. (LWAY)?

Remember, the markets move fast and things may quickly change for this stock. Our MarketClub members have access to entry and exit signals so they'll know when the trend starts to reverse.

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The MarketClub Team
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