Egg-cellent Opportunity: Why Cal-Maine Shares Are Still a Buy
The past year has seen Cal-Maine, the largest producer and seller of fresh eggs in the United States, soar to new heights with an impressive 80% gain. Despite this remarkable performance, the company remains an attractive investment opportunity, and here’s why.
Strong Positioning in the Current Market
As consumers grapple with inflation, eggs have emerged as an affordable source of protein, making Cal-Maine well-positioned to capitalize on this trend. With a wide range of brands, including Egg-Land’s Best and Farmhouse Eggs, the company sells its products to major retailers like Walmart and Costco. The price of eggs may have increased, but it remains relatively low compared to other protein sources like meat.
Long-Term Favorability
Eggs are a staple in 97% of U.S. households, ensuring a consistent demand. Moreover, the FDA’s proposed guidelines will soon designate eggs as a “healthy food,” further boosting their reputation as a nutritious and affordable option. The growing popularity of cage-free eggs also presents an opportunity for Cal-Maine, which is already investing in ramping up its cage-free production and acquiring cage-free producers.
Attractive Valuation and Dividend Yield
Despite its strong performance, Cal-Maine’s shares remain undervalued, trading at just 12.1 times 2025 consensus earnings estimates, significantly lower than the broader market’s multiple. The company’s forward dividend yield of 3.8% is also triple that of the S&P 500, making it an attractive option for income-seeking investors.
Variable Dividend Policy
Cal-Maine’s dividend policy is designed to optimize returns to shareholders through economic cycles, paying out one-third of its net income in the form of dividends. While this means the dividend can vary, the company has recently paid out an attractive dividend of $1.02, demonstrating its commitment to rewarding shareholders.
Wall Street’s Overlooked Gem
Cal-Maine has flown under the radar of many investors, despite its strong performance. With a Moderate Sell consensus rating and an average stock price target implying 20.8% downside potential, the company presents a compelling investment opportunity for those willing to look beyond the surface.
The Bottom Line
Cal-Maine’s strong recent performance, favorable positioning in the current market, long-term outlook, inexpensive valuation, and attractive dividend policy make it an attractive investment opportunity. Even after gaining 80%, the stock still offers significant upside potential, making it a compelling choice for investors seeking a stable and rewarding investment.
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