What is going on with Salada Foods share price is the question of a number of investors with the price having been pushed to a record high of $100 in 2021 on a pre-split basis, with the last traded price for the stock at $9.30, the equivalent of $93 on a pre-split basis.
Before the company announced a ten to one stock split, the stock traded at $28.22 on January 12, this year, the day Salada Foods’ directors advised that it will be considering a stock split at a board meeting scheduled to be held on January 21. The next day the price jumped to $34.04 and hit $47.89 on February 8 but pulled back to $38.09 on February 22.
The stock traded ex split on March 30, with the last trade for the day at $5.45. The day after, news reports incorrectly said the stock price had tumbled 85 percent, but the price actually rose to a record high. The JSE trading report for that day currently shows that the price hit a 52 weeks’ low of $4.95 with the 52 weeks’ high of $50.50. On April 1, the highest price for the day was a record $7.20, but the JSE shows the 52 weeks’ high of $50.50 and the low as $4.95. On April 6, the highs and lows were adjusted to $7.20 and $2, but the graph of the stock price on the exchange still shows the high at $50 as there is no adjustment for the historical prices that would allow for proper comparison. The JSE has a note at the time of the sharp price change as a Capital Distribution, which is not correct as there was no such event.
The above leaves many investors confused. No wonder they are pushing the stock to levels that defy gravity and logic. The news that the stock fell 85 percent sent many unsuspecting investors flying into the stock thinking they are getting a bargain.
Salada reported earnings in the December quarter of 13 cents per share on revenues that fell from $288 million in 2019 to $226 million in 2020. If it is assumed that sales return to the 2019 level for the rest of the 2021 fiscal year with the same profit margin without any further increased cost, the company would earn around 23 cents per share for each quarter, putting full year earnings under $1 before the ten to one stock split. It would mean earnings per share of fewer than 10 cents, putting the PE ratio at an aggressively high of 90 times earnings. Is the company doing some things that will lift earnings dramatically? Is the question that needs an answer? To justify the current stock price, it would require earnings per share somewhere in the 50 cents region, based on the 1 billion shares now issued or $500 million for the year. That is not going to happen anytime soon.
This is a classic case for the company and the Stock Exchange to have provided the public with information on the company’s operations so that investors can be protected.
Salada stock price built on folly
May 10, 2021 by
