The Costa Group Holdings Limited (ASX: CGC) share price has fallen 28.5% lower in 2019 as the company has downgraded earnings guidance and continues to battle declining profitability – but could it be a potential growth winner?
Why the Costa Group share price has tanked in 2019
The Aussie fruit and vegetable producer's share price fell nearly 40% in one day back in early January as the company provided an update on its FY19 earnings guidance.
The trading update saw the company announce "subdued demand" in a number of categories including tomato, berry and avocado in December 2018. An early finish to the citrus 'off season" and reduced pricing in a number of product lines also hit the company particularly hard.
The announcement in itself didn't say anything too damaging, but a comment that the company expects flat growth for the 12-month NPAT before SGARA and material items and amortisation (NPAT-S) compared to previously forecast low double-digit growth sent the share price tumbling.
Why could Costa Group be in the buy zone?
As I said, the announcement that actually sent the share price into freefall wasn't all that bad.
I think the current $5.13 per share valuation might be a case of momentum more than fundamentals which indicates that the Costa Group share price could be a bargain.
The stock is offering a dividend yield of 2.63%, which is solid even if lagging its S&P/ASX200 Index (ASX: XJO) peers a little, while its current P/E multiple of 30.8x earnings may be a little on the expensive side.
However, when including January's hefty valuation adjustment, the share price has climbed 137% in the last 5 years and the fact that it operates in the Consumer Staples industry means it could be a good defensive option should economic growth head south in the back half of this year.
For those who aren't as sold on Costa's prospects, I'd suggest checking out these top growth shares could prove to be market-beaters in 2019.
