Up 65% in the past year: What’s happening with the Graincorp (ASX:GNC) share price?

Shares in the Aussie commodities group are surging higher in 2021

| More on:
Nufarm share price profit result Farmer in field of crops with arms in the air welcoming rain Elders share price buy NSW flood ASX agriculture shares

Image Source: Getty Images

Eagle-eyed investors would be watching the Graincorp Ltd (ASX: GNC) share price right now.

Shares in the Aussie commodities business have been surging higher in 2021 and the past year more broadly. The Graincorp share price was swapping hands for $6.50 at Wednesday’s close of trade.

So, what’s helping propel the Aussie grain business’ valuation to its current level?

What’s driving the Graincorp share price?

Graincorp’s core business is in the receipt, storage and management of grain and related commodities. The Aussie company currently boasts a market capitalisation of $1.5 billion and is trading just shy of a 52-week high.

Perhaps the most surprising thing is the company’s price to earnings (P/E) ratio. Graincorp’s current P/E ratio is 277.8 times earnings — an astonishing valuation.

The Graincorp share price has rocketed 68% higher in the last 12 months on the back of strong profitability and earnings growth. Unlike many other ASX companies, Graincorp reports on a May (half-year) and November (full-year) reporting cycle.

That means we didn’t get to see the latest results from the group during the August reporting season just gone. We did, however, get a guidance upgrade from the Aussie company last month.

Looking ahead

Graincorp has upped its FY21 underlying earnings before interest, tax, depreciation and amortisation (EBITDA) and net profit after tax (NPAT). The Aussie commodities group was previously expecting underlying EBITDA of $255 million to $285 million with underlying NPAT of $80 million to $105 million.

Underlying EBITDA is now expected to hit $310 million to $330 million with underlying NPAT coming in at $125 million to $140 million.

The significant expected earnings bump saw the Graincorp share price surge higher in August. It comes after strong performance from the company’s east coast Australian grains business amid a strong harvest season.

It’s good news for shareholders following on from a solid half-year result in May.

The Graincorp share price is now up 51.9% year-to-date and trading just shy of its $6.54 per share 52-week high.

Should you invest $1,000 in Graincorp right now?

Before you consider Graincorp, you'll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Graincorp wasn't one of them.

The online investing service he’s run for nearly a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of August 16th 2021

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Gainers