Maple Leaf Foods (TSX: MFI) stock is witnessing a downside correction in September 2023 after rallying by nearly 16% in the previous three months combined. Nonetheless, MFI stock continues to outperform the broader market as it currently trades at $27.96 per share with nearly 14.4% year-to-date gains, taking its market capitalization to $3.4 billion. By comparison, the TSX Composite Index is up 5.7% in 2023.
Before we discuss whether it is the right time to buy Maple Leaf Foods stock now, let’s take a closer look at some key fundamental factors responsible for its recent price movement.
Maple Leaf Foods stock
If you don’t know it already, Maple Leaf Foods is a Mississauga-headquartered food-processing firm that offers a range of food products, like ready-to-serve meals, prepared meats, and plant protein-based products. Based on its 2022 revenue, the company made nearly 75% of its total revenue from its home market, while the remaining came from other international markets, including the United States and Japan.
Last year, Maple Leaf’s business faced several challenges due mainly to high inflationary pressures, dislocation in the pork markets, and supply chain disruptions. Besides these factors, job vacancies and a cybersecurity incident also badly affected its business operations. Notably, the company experienced an estimated economic impact of more than $23 million from the cyberattack in November 2022, leading to a system outage and interrupting its normal business activities.
As a result, Maple Leaf posted an adjusted net loss of $0.26 per share in 2022, despite a 4.8% YoY (year-over-year) increase in its total sales to $4.74 billion. These disappointing results explain why MFI stock dived by 16.4% last year.
The macroeconomic scenario worsened further in 2023, as steep increases in interest rates and continued inflationary pressures kept affecting consumer spending. Despite these challenges, however, Maple Leaf’s total sales rose 5.3% YoY to $2.44 billion in the first half of 2023. For the same period, its adjusted operating earnings also jumped 64% YoY to $65.2 million with the help of positive contributions from its plant protein group.
Maple Leaf’s improved financial performance in the first half of 2023, despite the ongoing adverse economic and market environment, could be the primary reason why its share prices have outperformed the broader market on a year-to-date basis.
Is MFI stock a buy in September 2023?
Although, indeed, Maple Leaf Foods is currently facing a challenging market environment, we must remember that most of these challenges could be temporary, arising mainly due to the ongoing economic slowdown. On the positive side, the company is still focused on boosting its long-term financial growth potential, even in such tough times. For example, Maple Leaf made a long-term investment in a London paltry facility in 2022, which is expected to be fully ramped up by the end of this year.
Besides these factors, its healthy balance sheet, increased focus on disciplined capital spending, and U.S. market expansion plans make MFI stock look attractive to buy now to hold for the long term, especially after it has slipped by about 4% in September so far.
