Seeking Alpha: The Amira Nature Foods Story Is Coming Along Nicely

My January 7 call to buy Amira Nature Foods (ANFI) didn't work right away (the shares did dip back below $7 a few times), but patience has paid off as the shares are up more than 90% on a year-to-date basis. I'm sure there will be those investors and readers who will continue to avoid Amira due to the working capital-intensive business model that the company's operations require, but I take the position that the growing share of basmati rice in the world's rice consumption, as well as the company's efforts to push branded sales through sizable retail channels like Costco (COST) in the U.S. and Morrisons (OTC:MRWSY) in the U.K., more than compensate for those concerns.

All of that said, while I'm happy to take a victory lap on a successful call, I'm not necessarily eager to double-down on that pick. Even mid-teens revenue growth and a free cash flow margin in the mid-single digits only gets me to around $15 per share in fair value (up from about $10.50 when I wrote back in January). While I may be too harsh with my discount rate (a 1% reduction would push the fair value to $17.50), this is still a business with commodity, currency, and political risk, to say nothing of execution risk when it comes to the company's up-market retailing plans.

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The Amira Nature Foods Story Is Coming Along Nicely