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Inghams Group: This massively shorted stock was a top performer on the S&P/ ASX200 today

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The Inghams Group Ltd (ASX: ING) share price climbed 4% to $3.03 today, but is still down around 30% over the past year.

The poultry farmer has also been among the most heavily shorted businesses on the S&P/ ASX200 (ASX: XJO) over the past year. As at October 15 2019 it had 15% of its outstanding scrip shorted according to ASIC’s latest data.

Over FY 2019 it reported a net profit of $126.2 million on sales of $2.48 billion and supplied around 4 million birds per week over the fiscal year.

It does carry net debt of $263 million on around 1.3x underlying EBITDA of $208.6 million. However, this alone is probably not enough to explain the high amount of investors betting on the share price falling further. 

It also paid out 19.5 cents per share in fully franked dividends over the last fiscal year to put it on a 6.4% yield plus full franking credits. Based on 33.8 cents it also trades on just 9x trailing earnings, with management declining to provide specific guidance for FY 2020.

It did flag that cost inputs were rising, but that underlying consumer demand in Australia for chicken is strong and growing. 

Given the large amount of short interest investors can continue to expect volatility in the stock. 

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Returns as of 6th October 2020

Motley Fool contributor Tom Richardson owns shares in Dicker Data. The Motley Fool Australia owns shares in Dicker Data. 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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