RFG heading for checkout
Could Retail Food Group’s (RFG) golden run be coming to an end?
The food and beverage franchise brand owner is one of the few stocks to trade in the red this morning as a downgrade by UBS gave investors an excuse to take profit after the stock delivered a stunning 61% total return over the past year.
RFG even managed to close at a record high of $4.53 on Monday before UBS cut its recommendation on the stock to “neutral” from “buy”.
More downgrades could follow given its current share price is well ahead of all broker priced targets listed on Bloomberg. Despite this, the majority of brokers have a “buy” rating on the stock.
This isn’t to say there is anything wrong with the company, which owns well-known brands like Donut King, Brumby’s Bakeries and Michel’s Patisserie. It’s just that analysts would probably struggle to justify urging investors to buy the stock around current levels unless there is an upgrade to earnings forecasts.
That is only likely to happen through corporate activity as consensus estimates are already factoring in very reasonable growth expectations for the current year. Earnings per share (EPS) is tipped to expand by nearly 12% to 31.5 cents and sales by 9% to $160 million.
This puts the stock on a price-earnings multiple of 14 times, which is a 30% premium to its five-year average and a 14% premium to the consumer discretionary sector.
RFG is part of the Uncapped 100.