The year 2022 has not been kind to equity markets so far. Despite a broad-based correction, some names continue to soar, driven by company-specific fundamentals.
This week, we are highlighting MGP Ingredients (MGPI), which provides alcoholic beverages and food ingredients and scores on a host of criteria for seasoned investors.
Why MGPI?
MGP has been around since 1941 and is the largest U.S. producer of rye whiskey and distilled gin, as well as specialty wheat proteins and starches.
MGPI provides distilled spirits, branded spirits, as well as food ingredient solutions. It also offers premium, super-premium, and ultra-premium products under its branded spirits segment. Its Ingredient Solutions segment provides specialty proteins as well as starches.
MGPI shares have gained 30 times over the past ten years and nearly four times since the pandemic correction in March 2020. So far in 2022, the stock is up 23.4% while broader markets are in bear territory.
This market outperformance has been on the back of improving fundamentals for the company. Revenue has ticked upwards from $362.7 million in 2019 to $626.7 million in 2021. Concurrently, earnings have expanded from $2.27 per share in 2019 to $4.24 per share in 2021. These figures are further expected to rise to $757.3 million and $4.85 per share, respectively, in 2023.
This robust growth is also visible in MGPI’s recent first quarter numbers, with an 80.2% year-over-year top-line growth and a 144.3% jump in operating income. Additionally, MGPI’s diverse product portfolio positions the company well to capitalize on robust consumer demand across its segments.
Additionally, the company has been consistently outperforming analysts’ estimates for a while now, and its second-quarter release on August 4 remains a key event to keep an eye on. The Street expects MGPI to deliver EPS of $0.94 for Q2. In the year-ago period, it had delivered EPS of $1.27 versus the Street’s expectations of $0.53.
Analysts Are Bullish about MGPI
It is not a surprise then that all of the three analysts covering MGPI have assigned it a Buy rating. Consensus remains a Strong Buy alongside a price target of $115, implying a 10.7% further upside.
Hedge Funds Raise Stake in MGPI
MGPI, with a market capitalization of $2.27 billion and a daily volume of around 100,000 has yet to pop up on investors’ radar, but hedge funds are already steadily buying up the stock.
TipRanks data shows hedge funds increased holdings in MGPI by 98,700 shares in the last quarter and are positive on the stock.
Notably, two major names have increased their holdings in MGPI. Ray Dalio’s Bridgewater Associates holds MGPI shares worth $3.15 million, and Richard Driehaus’s Driehaus Capital Management holds MGPI shares worth $22.25 million.
MGPI insiders have lapped up shares worth $832,400 in the last three months, which indicates a positive insider confidence signal for investors.
Closing Note
At a time when spotting potential investments is tricky and market gyrations are ongoing, MGPI stock has proven resilient.
Improving fundamentals, a broad product offering, and positive sentiment from across market participants merit investor attention for this spirits maker.
A price-to-earnings ratio of 20.5 and a 0.46% dividend yield should help work up an appetite already.
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