Recently, the company completed its $1.7 billion sale of the packaged-foods segment to Itochu. After the sale, Dole expects to have a much stronger balance sheet with a post-transaction net debt/ adjusted 2013 EBITDA of around 2.5. As a result, Dole Food Company, Inc. (NYSE:DOLE) will benefit greatly from the huge reduction in the interest expense.
Moreover, the company has recently set the rate for refinancing its loans of around $625 million. These loans, due in seven years, will pay interest at around 3% to about 3.2% more than the LIBOR rate.
At $10.40 per share, Dole Food is worth $922.8 million in market capitalization. The market values Dole Food at as much as 20.6 times EV/EBITDA. Even with a much stronger balance sheet, a recent high EV multiple might restrain investors from initiating a long position in Dole Food at its current price.
Fresh Del Monte Produce Inc (NYSE:FDP) is the largest company among the three, with around $1.6 billion in total market cap. Fresh Del Monte is a global sourcing, transportation and marketing of fresh-cut produce in different areas of the world, including Europe, the Middle East and Africa.
Recently, Fresh Del Monte has won a fruit-licensing battle with Del Monte Foods, and was awarded more than $13 million. As more and more consumers realize the benefits of eating healthy and maintaining a good diet for a better health, an increasing number of consumers will turn to fresh fruit products. This consumer trend might affect Fresh Del Monte positively in the near future.
In 2012, it generated around $3.4 billion in revenue and $143.2 million in net income, 54.8% higher than the net income in 2011. The higher net income was due to much lower costs of good sold, declining SG&A expenses and falling asset- impairment charges.
At around $27 per share, Fresh Del Monte Produce Inc (NYSE:FDP) has the cheapest valuation at only 7 times EV/EBITDA. Furthermore, investors could get a dividend yield of 1.9% while both Dole Food and Chiquita Brands International, Inc. (NYSE:CQB) do not pay any dividends.
My Foolish take
Chiquita Brands International, Inc. (NYSE:CQB) could be considered an opportunistic stock for investors to bet on the company’s turnaround effort. If the EBITDA reaches $175 million, with only 7 times EV/EBITDA valuation, Chiquita’s EV might reach $1.2 billion, or $10 per share, a 38% from its current trading price. Barron’s, Johnathan Feeney of Janney Capital Markets is more bullish, thinking that Chiquita is worth around $12 per share.
The article Betting on This Turnaround With Nearly 40% Upside Potential originally appeared on Fool.com and is written by Anh Hoang.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.