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Is the Costa Group Holdings Ltd (ASX:CGC) share price in the buy zone after today’s AGM update?

In afternoon trade the Costa Group Holdings Ltd (ASX: CGC) share price has edged higher ahead of its annual general meeting in Melbourne at 3pm. At the time of writing the horticulture company’s shares are up almost 1% to $6.91.

Ahead of the meeting the horticulture company released its annual general meeting presentation which included its guidance for the full year.

What is expected in FY 2019?

When Costa Group released its full year results in August, management spoke positively about the year ahead.

It advised that it was focused firmly on its growth plans which include building capacity and market positioning both domestically and internationally.

In addition to this, it advised that significant scale would be delivered in mushrooms and avocados. This, combined with growth in tomatoes and berries, is expected to provide long term sustainable returns.

Based on these plans and the trading conditions at the time, management advised that it expected Costa Group to generate low double digit NPAT-S growth for the 12 months ending June 30 2019.

This afternoon the company has reaffirmed this guidance but warned that FY 2019’s earnings will be skewed towards the second half.

First half earnings are expected to be lower year on year due to a lighter citrus crop, additional farming cost investments, higher depreciation and interest charges, and costs incurred with the acquisition of the Nangiloc Colignan citrus and grape farm.

As well as reaffirming its full year guidance, management reconfirmed its long term guidance for an average trajectory of low double digit annual average NPAT-S growth over a three to five year horizon.

Should you invest?

Based on its current share price, I estimate that Costa Group’s shares are changing hands at around 25x forward earnings.

While it is no longer a bargain buy like it was last month when it was trading below $6.00, I still see value in Costa Group’s shares for long-term investors.

This could make it worth considering along with fellow consumer staples shares A2 Milk Company Ltd (ASX: A2M) and Bellamy’s Australia Ltd (ASX: BAL).

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended COSTA GRP FPO. The Motley Fool Australia owns shares of A2 Milk. 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 Scott Phillips.

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