In this article we are going to summarize a bullish thesis posted on VIC regarding Seaboard Corporation in July when SEB was trading at $3062. Currently SEB shares are trading at $2993, so investors can invest in this idea at a lower price than when it was first pitched. SEB’s trailing P/E is 11.7.
Seaboard Corporation (SEB) is a Kansas City-based agribusiness conglomerate, having been in the game for roughly 100 years under the leadership of the Bresky family, currently holding 73% ownership. With a market capitalization of $2.97 billion and its stock price at a whopping $3,062, Seaboard’s business spans multiple segments, each playing a critical role in its operations covering pork production, commodity trading and milling, and marine shipping, among others.
The company’s pork segment is a vertically integrated operation, which accounts for roughly 37% of earnings historically, covering everything from production to processing. However, the segment has been up against cyclical pressures, particularly in 2023, when the segment posted a $528 million loss, arguably its worst performance in decades. On the other hand, the Marine segment, which contributed 29% of earnings, has been a standout, delivering $591 million EBIT in 2022. Its Commodity Trading and Milling segment, operating in Africa and South America, tends to be more stable and has avoided losses this century.
Seaboard’s stock is trading at 0.64 times its book value of $4.6 billion, which many analysts view as undervalued for a company backed with a fortress-like balance sheet and a long-term profitable operational history. Historically, the stock has traded at an average of 1.2x book value, peaking up to 3x in boom periods. Moreover, it has also earned an 11% ROE over time, supporting its value proposition, even during periods of sluggishness.
Looking ahead, analysts forecast an 8% ROE over the next three years, which could lead to a significant revaluation. If the stock were to return to its book value, it would represent over 50% upside from current levels.
All in all, Seaboard’s diversified operations and its status as a long-term, family-run business offer stability, while its cyclical nature offers upside potential as market conditions improve. The recent stock repurchase at a 14% discount to the market price highlights management’s shareholder-friendly approach, making the stock an interesting bet for value-focused investors.
While we acknowledge the potential of SEB as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than SEB but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article was originally published at Insider Monkey.
Hedge Fund Resource Center