One of the toughest things to do with a successful stock is to decide when enough is enough and a stock has overshot its mark. AGT Food and Ingredients's (OTCPK:AGXXF)(AGT.TO) shares have risen another third over the past six months, continuing a very healthy run for one of my favorite stocks in the food space. Better still, these gains aren't built on smoke and mirrors - the company has continued to make very real progress with its higher-margin food and ingredient lines and has considerable room to expand from here.
Selling a winner too early can be painful, and I don't think AGT is
ridiculously overvalued. Rather, I just don't think it's notably
undervalued anymore and that transitions it more to a hold (or maybe a
"sell if you need the cash for something cheaper") in my view. I do
believe that the company can generate long-term revenue growth in the
mid single digits or higher, but I have a hard time seeing how the FCF
margins ever go much past the mid single digits; even the specialty
food/ingredients business is likely to be a sub-10% FCF margin business
over the long term.
Read more here:
AGT Food And Ingredients May Need Some Time To Digest Its Gains