3 reasons I think Capilano Honey Ltd is a buy at today’s share price

Credit: Gavin Mackintosh

One of the shares I’ve tipped to beat the market this year is Capilano Honey Ltd (ASX: CZZ). The leading honey producer ticks a lot of boxes for me and is a strong buy as far as I’m concerned.

Here are three reasons why I think investors should buy its shares today:

Reason 1. New product launches.

The company recently launched its Beeotic Prebiotic Honey. Beeotic is the world’s first clinically tested prebiotic honey which nourishes the good bacteria in the gut whilst suppressing the bad bacteria. The company has advised that gut health is a global health trend, with sales growing strongly. I believe this product could be a key driver of growth in 2017.

Reason 2. Strong growth prospects.

In FY 2016 Capilano Honey grew its earnings per share by 21%. I expect there could be more of the same in the year ahead thanks to further market share gains, new product launches, and an increase in exports due to a weak Australian dollar. Although the company exports to 32 different countries, my focus will be on its Chinese exports. In FY 2016 exports to China increased by an impressive 59.6%. I feel further growth could be delivered this year now that the company has commenced distribution into China through the pharmacy channel.

Reason 3. Its shares could be dirt cheap.

Capilano Honey’s shares are changing hands at just over 15x trailing earnings, compared to the market average of around 17x earnings. Considering its explosive growth prospects, I believe this makes its shares relatively cheap. Especially with consumer staples peers such as Treasury Wine Estates Ltd (ASX: TWE) and a2 Milk Company Ltd (Australia) (ASX: A2M) trading at 34x and 48x trailing earnings, respectively.

I would suggest investors make room in their portfolio for Capilano Honey by removing these three wealth-destroying shares which I've tipped to drop lower in 2017. Do you own them?

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Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia owns shares of A2 Milk and Capilano Honey Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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