Valuation Scorecard: Stock Rating D-Negative (4/9/24)-MGP Ingredients Inc (MGPI).

MGP Ingredients’ common shares will need to reach $137 to achieve average annual stock market performance of 9.0% over the next 6 years. MGP Ingredients’ stock price will need to reach $161 by 2029 to achieve upper quartile performance. At the current price of $82, what is the market’s view of MGP Ingredients’ future operating performance?

Executive Summary

• Key MGP Ingredients characteristics: high stability, high expected growth, high financial strength, and average profitability. A big positive influence on MGP Ingredients’ valuation is its superior Growth.
• Average valuation, below market shareholder returns. Current valuation levels are average relative to the MGP Ingredients Peer Group. Recent market returns have underperformed the MGP Ingredients Peer Group. Total shareholder returns expected to significantly beat the overall equity market. Based on current investor expectations, MGP Ingredients shares should reach a level of $173 by 2029 — an 13.8% per year total shareholder return. A 2029 stock price of $137 would reflect median performance and a price of $161 would be required to reach upper quartile performance.
• Growth has been MGP Ingredients’ biggest valuation strength. Historical growth has been very high relative to the MGP Ingredients Peer Group and forecasted growth is relatively high. Asset Growth, Equity Growth, and Revenue Growth have been superior. These factors have buoyed market perceptions of MGP Ingredients. MGP Ingredients’ historical income statement growth and balance sheet growth have diverged. Revenue growth has fallen short of asset growth; earnings growth has paralleled equity growth and return on equity has been stable. MGP Ingredients’ consensus growth expectations are in line with past growth.
• Pretax Margin is group leading. Asset Turnover is group lagging. The company has very low cash and will have to work to generate attractive investments and improve valuation.
• MGP Ingredients’ risk profile is very favorable. Overall variability has been only average with only average revenue variability, very low E.P.S. variability, and relatively low stock price volatility. Financial Strength is relatively high and earnings’ expectations are relatively high. The debt/capital ratio has risen.

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