STOCK TO BUY TREEHOUSE - OCTOBER 2017 | Summary and Q&A

TL;DR

Three House Foods is a private label food producer with strong growth potential, attractive cash flows, and an undervalued stock price, making it an ideal takeover candidate.

Key Insights

• 👀 Analysts often focus on a company's short-term quarterly performance, but looking beyond that timeframe can uncover potential undervalued stocks.
• 🈂️ Three House Foods' negative earnings are primarily due to impairment charges, but when adjusted for these charges, the company's net income is actually quite good compared to market standards.
• 💐 The company's high cash flows, attractive free cash flow yield, and defensive position in the private label food market make it an attractive takeover candidate.
• 🎯 The private label industry is expected to undergo consolidation, creating opportunities for undervalued stocks to become targets.
• 😋 The growth potential of private label food brands, with players like Amazon and Aldi entering the market, makes Three House Foods a promising investment.

Transcript

good day fellow investors one of the best way to find bharden investments or great investments is to look for companies that don't have linear earnings if if a company's earnings go up and down analysts don't know what to do and even investors they look they don't know how to look at the metrics and therefore the stock price also goes up and down o... Read More

Questions & Answers

Q: Why is Three House Foods considered an attractive takeover candidate?

Three House Foods has strong operating cash flows and a high free cash flow yield, making it appealing to potential buyers looking for a profitable acquisition target.

Q: What caused the decrease in Three House Foods' margins?

Margins were initially lowered due to the acquisition of All-Court Love and private labels, but the management aims to take advantage of synergies and increase margins by 300 basis points by 2020.

Q: How does Three House Foods plan to grow in the future?

The company intends to focus on paying down debt and engaging in further acquisitions to become a ten billion dollar company.

Q: What risks are associated with investing in Three House Foods?

There may be future facility closures and restructuring, but once the situation is resolved, the stock price is expected to increase.

Summary & Key Takeaways

• Three House Foods is a private label food and beverage producer focused on customer brands and custom products.

• The company has been growing through acquisitions and has increased sales nine times in the last 12 years.

• The stock price is currently depressed due to lower margins, but the management plans to increase margins by 300 basis points by 2020.