Why Costa Group Holdings Ltd shares are on fire today

The Costa Group Holdings Ltd (ASX:CGC) share price has stormed to an all-time high today. Here's why…

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The Costa Group Holdings Ltd (ASX: CGC) share price has continued its strong run and is up 6.5% to an all-time high of $5.59 in late morning trade.

This brings the horticulture company's year-to-date return to in excess of 62%.

Why are its shares higher?

With no news out of Australia's leading grower, packer, and marketer of fresh fruit and vegetables, today's gain is likely to be related to a positive broker note out of Ord Minnett.

According to the note, Ord Minnett has upgraded Costa Group's shares from lighten to a hold rating with an increased price target of $5.01.

The broker expects the company to benefit from higher citrus export pricing, offsetting any weakness from its berry exports.

Should you invest?

Whilst it is good to see a broker turn positive on a company, I am a little surprised by its move higher today considering the price target and hold rating.

Although I am a big fan of the company, I'm not a fan of its current valuation.

At 27x earnings I think Costa Group is a little expensive considering its current growth profile. In FY 2018 management expects profit growth of circa 10%, which I don't believe justifies the premium its shares trade at.

In light of this, I plan to avoid the company and take a look at other consumer staples shares such as Tassal Group Limited (ASX: TGR) and Treasury Wine Estates Ltd (ASX: TWE).

Motley Fool contributor James Mickleboro has no position in any of the 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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