Costa

Thinking about everyone’s favourite berry company.

We’ve written a lot of negative notes on Costa, over time, which is often what we do when we are trying to turn an investment case on its head.

Here’s a more positively inclined take.

Costa (CGC) has enjoyed periods of fairly wild exuberance in the past (note that 2018 period of market cap relative to asset base), but is now going the other way. Recent acquisitions bolstered the asset base, but market placing (relatively) little value to this enlarged base.

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They don’t struggle to generate sales growth…

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…[not that our ARIMA model knows what to do with it, other than extrapolate the trend and adjust for seasonality]…

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…but profitable growth has been harder to come by, and requires lots of capex. Operating cashflow is quite reasonable, otherwise, and there’s that positive ag thematic…

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…weather, vagaries of crops (virus, bacteria, whatever can ruin a harvest) make forecasting pretty hard.

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But netting it all out, the embedded growth assumptions don’t seem too arduous, despite an otherwise high seeming headline multiple (e.g. 18x forward).

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And there is modest insider activity

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File under unsure, but very interesting, and not an unreasonable tilt for our higher risk, higher returning absolute focused funds.

In a disagreement between market value, and book value, the market is usually right. But still interesting, after a torrid few years, particularly in context of my $20 a day berry habit.

Daily dose of blueberries, strawberries and raspberries on yoghurt is a thing when you are over 30.

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