In his business, you’d expect Calavo Growers, Inc. (CVGW) Chief Executive Officer (CEO) and President Lecil Cole to know the right time to pick things, especially avocados.
After all, Calavo Growers is a global avocado industry leader that primarily operates as an international marketer and distributor of fresh avocados, as well as other fresh produce, such as tomatoes and papayas.
CVGW has a global presence, with operations in the United States, Mexico, Canada, and other countries. The company sources avocados from various regions around the world, including Mexico, Chile, and Peru, and has established relationships with over 1,000 growers.
Along with knowing when avocados are ripe, the CEO appears to know when his company stock is in season too. In the last decade, Cole bought and sold CVGO stock a bunch of times. Overall, he sold more than $76.3 million in stock while buying a touch more than $13 million in the last 20 years. (1)
We will focus on the buys.
Starting in September 2003, Cole began buying Calavo stock at $6.99 and continued to build his position in the agriculture company until September 2008 at $11.99 per share. One year later, he began selling stock, starting at $19.37. He sold and kept on selling all the way to July 2015 for as much as $55.
After putting his CVGW trading on hold for nearly two years, buyer Cole returned for a pair of purchases in March and April of 2017, acquiring $7.7 million in stock. Once again, it didn’t take long for the President and CEO to harvest profits. He put the seller hat back on in September 2018, unloading stock for $103.67 and kept on selling until January 2020 before heading to the sidelines.
Last week, Cole got back into action, buying 50,000 shares at $24.29 for a total of $1.21 million. His return follows CVGW reporting earnings and sales falling well short of Wall Street’s expectations and the stock taking a beating. (2) The underwhelming results also brought Cole out of retirement and back into the leading role at Calavo for the next three years. (3)
The landscape tilts in Cole’s favor as the global avocado market was valued at approximately $9.2 billion in 2020 and is expected to reach over $21 billion by 2026, growing at a compound annual growth rate (CAGR) of 12.9 percent.
Analysts believe the avocado company’s earnings will bounce back next year to $1.67 from $1 per share (EPS) in 2023, compared to $1.25 last year. The top line is expected to slip close to 10 percent this year but rebound to $1.14 billion in 2024 versus $1.07 billion in 2023.
In the last five years, the food distributor’s lowest price to earnings (P/E) valuation was 24.55. If Cole can get EPS back on track and hit next year’s estimate of $1.67, then the stock would trade at $41 using its minimum P/E. Meanwhile, Wall Street has a consensus one-year price target of $36.00. Shares trade at $26.73 as we type.
OVERALL: CEO Lecil Cole’s record of being on the right side of the Calavo Growers, Inc. (CVGW) trade is impressive. However, the company is embarking on a plan to cut costs and improve shareholder returns. It’s been our experience that turnarounds can take time and often have rough patches along the way. As such, CVGW is only appropriate for investors with a time horizon into 2025 and with above-average risk tolerance.
1 – https://www.secform4.com/insider-trading/1162344.htm
2 – https://finance.yahoo.com/news/farming-company-calavo-growers-goes-162630698.html