Is the Bega (ASX:BGA) share price a buy after crashing 10%?

Are Bega’s shares good value?

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The Bega Cheese Ltd (ASX: BGA) share price was a very poor performer on Thursday.

The diversified food company’s shares finished the 10% lower at $5.04.

This was an improvement on the 52-week low of $4.84 it hit during intraday trade.

Why did the Bega share price sink?

Investors were selling down the Bega share price yesterday following the release of a trading update.

Although the company revealed that it expects to deliver strong operating earnings growth in FY 2022, it was still well short of the market’s expectations.

Bega has provided guidance for normalised EBITDA in the range of $195 million to $215 million. This represents a year on year increase of 37% to 51%. However, Goldman Sachs was expecting $227 million and the Bloomberg consensus estimate stood at $222 million.

Is this a buying opportunity?

Despite the sharp pullback in the Bega share price yesterday, the team at Goldman Sachs aren’t in a rush to invest.

This morning the broker reiterated its neutral rating and cut its price target by 13% to $5.65.

It notes that Bega’s “earnings have been impacted by a decline in milk supply and pressure on margins, caused by continued strong competition for milk amongst processors.”

In light of this, Goldman has revised its earnings estimates meaningfully lower for the coming years.

It explained: “The key drivers of our revisions are: slightly lower milk intake volumes; and lower processing margins due to elevated procurement costs. We had previously expected global dairy commodity prices to offset elevated Australian farm gate milk prices. However, it has become apparent that continued strong demand from processors and retailers, combined with a decline in supply, has created a margin squeeze for BGA.”

Overall, the broker doesn’t see enough value in the Bega share price at the current level for a more positive rating and stays neutral.

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

Before you consider Bega, 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 Bega wasn't one of them.

The online investing service he’s run for over 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 January 13th 2022

Motley Fool contributor James Mickleboro 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.

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