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Why the Graincorp Ltd share price has gone gangbusters today

One of the biggest movers on the market today has been the Graincorp Ltd (ASX: GNC) share price.

In morning trade the food ingredients and agribusiness company’s shares are up almost 8% to $9.82, bringing their 12-month return to an impressive 23.5%.

Today’s gain is the result of a positive half-year update which revealed a 212.5% increase in underlying net profit after tax to $100 million.

While management has held firm with its guidance, I believe this puts the company in a great position to outperform its full-year underlying net profit after tax forecast of between $130 million and $160 million.

Pleasingly this would mean an end to a four-year streak of declining net profit after tax.

According to the release, the positive half-year performance was largely the result of a strong Australian grain harvest and higher export volumes.

A focus on improving network efficiency and costs management also played a key role. Half-year capital expenditures reduced by almost 60% to $113 million.

Should you invest?

Things certainly do look to be improving for Graincorp and its shareholders at long last.

At 15x forward earnings I think Graincorp’s shares do look to be good value and could provide significant upside potential if the company beats its full-year guidance.

In light of this I would put it up there with Tassal Group Limited (ASX: TGR) and Costa Group Holdings Ltd (ASX: CGC) as great investment options in the sector.

Where to invest $1,000 right now

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*Returns as of February 15th 2021

Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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