One of the worst performers on the ASX 200 index last week was the Costa Group Holdings Ltd (ASX: CGC) share price.
The horticulture company's shares fell heavily after the release of a disappointing half year result.
What did Costa report?
For the six months to June 30, Costa grew its revenue by 11.8% on the prior corresponding period to $573 million. However, due to adverse conditions during the Moroccan blueberry season, low mushroom demand, raspberry quality, and fruit fly issues, the company reported a statutory net profit after tax decline of 15% to $41.1 million.
Although this soft result still left Costa tracking broadly in line with the lower end of its revised target range outlined at its annual general meeting, management's outlook for the second half spooked investors.
It warned that "trading and forecasting remains challenging with potential further downside risk" to its guidance. This led to many investors hitting the sell button in a panic, sending its shares to a multi-year low.
Is this a buying opportunity?
One broker that believes this selloff is a buying opportunity is Goldman Sachs.
According to a note out of the investment bank, after reviewing Costa's results it has retained its buy rating, albeit with a lower price target of $3.80. This price target implies potential upside of ~20% for its shares over the next 12 months based on its last close price.
Goldman remains positive on Costa due to its belief that "the company still has a strong growth strategy that should deliver above-WACC returns as it expands production with: China; Morocco; new Blackberry varietals; its Raspberry long cane strategy; snacking tomatoes; and the Monarto mushroom expansion."
In addition to this, it thinks that Costa's valuation is very attractive after the pullback in its shares this year.
Its analysts have "forecast CGC to deliver a 3-yr EPS CAGR of 11% vs. the ASX Small Industrials of 8%."
Despite this, it notes that Costa's shares are "trading at a 7% discount to the ASX Small Industrials vs. a historic premium of 26% on 1-yr forward earnings."
Should you invest?
Whilst I intend to wait for an improvement in its performance before considering an investment, I do agree with Goldman Sachs that its shares look attractive at the current level.
Incidentally, Goldman has also recently placed buy ratings on the shares of Alumina Limited (ASX: AWC) and Bingo Industries Ltd (ASX: BIN). I think both shares could be worth taking a closer look at.
