Select Harvests Limited (ASX: SHV) is Australia's second largest integrated almond producer and distributor, responsible for the production, harvesting, processing and sale of almonds and almond products to the food industry. It also packages and distributes a range of natural health foods under the brands Sunsol, Soland and Lucky.
A Huge 2013/14
Between the start of 2013 and March 2014, Select Harvest shares jumped an incredible 430% as investors finally nutted out exactly how well positioned the company is.
Weather Issues
It appears that a number of shareholders have taken the opportunity to take some profits after the company announced that adverse weather conditions would impact crop yield this FY.
Select's 2014 crop will be around 10,500 metric tonnes, around 20% lower than that in 2013, however the realised price will be higher due to the ongoing drought affecting almond production in Florida.
Since hitting a high of $7.24 back in early March, Select's shares have pulled back nearly 30% to sit at around $5.12 currently.
2014 Forecast
One of the primary catalysts of the 400% jump in the share price was an increase in earnings per share from 16 cents in the 2012 financial year to over 40 cents in 2013. The 150% increase is not expected this time around, however consensus estimates indicate that 50 cents per share isn't out of the question.
Time to Buy?
Earnings per share of 50 cents would price Select on a forward price-to-earnings ratio of 10.1 and a dividend yield of 4% based on a payout ratio of around 40%. It appears that Mr Market is either pricing in earnings significantly lower than 50 cents this year, or is ascribing a higher risk to the company based on the fact that it's exposed to Australia's unpredictable weather.
Select is looking reasonable value for investors willing to hold over the longer term as production is expected to increase, barring any weather issues, debt is being slashed, and it is trading on a relatively low earnings multiple compared to peers.
