The Freedom Foods Group Ltd (ASX: FNP) share price has collapsed by 16% in 2020. Freedom Foods shares were asking over $5 a share in January – a long way from the $4.25 share price that is on offer at the time of writing. So is this niche food manufacturer an uncut gem at these prices?
Who is Freedom Foods?
Freedom Foods is a major player in the Australian health foods space, owning brands like Arnold's Farm, Messy Monkeys and Heritage Mill. Its popular healthy food offerings like cereals, plant-based milks and snack foods are readily available form grocers like Woolworths Group Ltd (ASX: WOW). Its large ranges also cater for a range of dietary requirements, including gluten-free, dairy-free and nut-free.
This company has been showing off very pleasing growth rates, reporting a 43.4% rise in net sales over the second half of last year. It's clear that Freedom is one of the biggest beneficiaries on the ASX of the trend towards healthier eating that's taken hold in recent years.
It's also likely (in my opinion) that Freedom Foods will benefit from the panic buying of staple foods that we've seen over the last few months.
Is the Freedom Foods share price a buy today?
I wouldn't have a problem investing in the current Freedom Foods share price, but I would have to be fairly confident its brands have built up enough trust and power to carry this company forward for years to come. Consumers' tastes in food (particularly 'health foods') can be cyclical to the point of impetuousness and Freedom Foods needs to make sure it's always ahead of the curve in this regard.
That said, I think the trend towards healthier eating isn't going away anytime soon, and thus Freedom Foods has a nice tailwind to work within.
On current prices, Freedom Foods is trading on a price-to-earnings (P/E) ratio of 88.94 and a dividend yield of 1.29%. Over the past 52 weeks, the share price has fluctuated between a low of $3.81 and a high of $5.98.
On first glance, this P/E ratio looks extremely high. However, I think it's worth noting that Freedom's management looks to have been prioritising revenue growth over earnings, which is understandable for a growing company.
I think the current Freedom Foods share price could be considered 'fair value', but if it were to dip substantially below its current 52-week low, it would stray into the 'bargain' territory from my perspective.
