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Is Chiquita Brands International, Inc. (CQB) Destined for Greatness?

Investors love stocks that consistently beat the Street without getting ahead of their fundamentals and risking a meltdown. The best stocks offer sustainable market-beating gains, with robust and improving financial metrics that support strong price growth. Does Chiquita Brands International, Inc. (NYSE:CQB) fit the bill? Let’s look at what its recent results tell us about its potential for future gains.

What we’re looking for

The graphs you’re about to see tell Chiquita Brands International, Inc. (NYSE:CQB)’s story, and we’ll be grading the quality of that story in several ways:

1). Growth: Are profits, margins, and free cash flow all increasing?
2). Valuation
: Is share price growing in line with earnings per share?
3). Opportunities
: Is return on equity increasing while debt to equity declines?
4). Dividends
: Are dividends consistently growing in a sustainable way?

What the numbers tell you

Now, let’s take a look at Chiquita Brands International, Inc. (NYSE:CQB)’s key statistics:

CQB Total Return Price Chart

CQB Total Return Price data by YCharts

Passing Criteria 3-Year* Change Grade
Revenue growth > 30% (11%) Fail
Improving profit margin (856.7%) Fail
Free cash flow growth > Net income growth (122.6%) vs. (773.4%) Pass
Improving EPS (771.6%) Fail
Stock growth (+ 15%) < EPS growth (28%) vs. (771.6%) Fail

Source: YCharts.
*Period begins at end of Q1 2010.

CQB Return on Equity Chart

CQB Return on Equity data by YCharts

Passing Criteria 3-Year* Change Grade
Improving return on equity (803.9%) Fail
Declining debt to equity 59.4% Fail

Source: YCharts.
*Period begins at end of Q1 2010.

How we got here and where we’re going

Things don’t look good for Chiquita Brands International, Inc. (NYSE:CQB) today. The banana-slinger earned only one out of seven possible passing grades, and even that lone pass was granted more on a technicality than on a genuine improvement. A big source of weakness is Chiquita’s net income which has fallen far into negative territory over the past few quarters. Will Chiquita be able to find money in the banana stand? Let’s dig a little deeper to find out.

In response to these recent quarters of depressing losses, cost pressures and internal churn, Chiquita underwent internal restructuring, and as a result, the company’s share price has more than doubled in the past year. Chiquita Brands International, Inc. (NYSE:CQB) earns 64% of its revenue from bananas alone, but consumers don’t seem quite so enamored of the yellow fruit (it’s actually a berry) of late — and weak banana prices aren’t helping, either.

However, Chiquita still managed to push its net income into positive territory with a $2 million bottom-line result in the first quarter of 2013, much better than the year-ago quarter’s net loss. Chiquita’s value chain restructuring might decrease sourcing and logistic costs, which will be necessary to drive margin expansion in the near future.

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