AGT Food And Ingredients Still Crawling Through The Doldrums

One of the key challenges in analyzing cyclical companies is the difficulty of modeling those cyclical peaks and valleys, particularly as companies like AGT Food and Ingredients (OTCPK:AGXXF) (AGT.TO) have a tendency to overshoot in both directions. I said in my last piece that I was holding off on buying into what looked like an undervalued pulse processor in lieu of waiting for some signs of stability in the business. It’s a quarter later and I’m still waiting.

I do expect that lower pulse production in Canada and a reversal of recent exceptional harvests in India will eventually snap the cycle back in the other direction, but timing these reversals is mostly down to guesswork and asking questions like “well, how much worse can it really get?” can be an invitation to trouble.

All the same, I like AGT’s ongoing focus on value-added operations and I do believe the cycle will eventually reverse, allowing AGT to generate mid single-digit revenue growth and low single-digit FCFs. Buying here in the teens will likely work out okay, but investors considering these shares have to have an above-average risk and volatility tolerance.

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AGT Food And Ingredients Still Crawling Through The Doldrums