Fundamental analysis
MAMA is an American company that manufactures and distributes quality pre-prepared meals that only need to be heated. The company prides itself on recipes with Italian roots, quality ingredients and good preparation to evoke the atmosphere of grandma’s kitchen. MAMA stock is classified as small caps, with a market capitalization of just $130 million. Daily Volume is only in the hundreds of thousands of shares traded.
The company operates in the Packaged Foods and Meats segment, which is not doing well at all. Over the past year, the sector has shrunk by 4%. By contrast, MAMA stock is up 150%. Projections for this year call for the sector to grow by 12%. Due to increased inflation, consumers are opting for cheaper ways of eating out. MAMA sells its meals cheaper than what customers get in a restaurant, but still at a luxury level compared to the cheapest options such as Chinese soups, noodles and other commonly available ready meals.
The company’s sales are growing, tripling from US$33 million to US$94 million in the past three years.
The company’s net profit has grown every year. In 2022, it was $2.3 million; this year it is expected to be $3.6 million.
MAMA does not pay a dividend.
Results
The company has hired former marketing director of food giant Mondelez Lauren Sella as its Cheif Marketing Officer. The move is expected to see Sella bring her experience of managing a large company and apply it to MAMA.
MAMA is expanding its recipe portfolio to include Asian cuisine, Mexican, Indian and more in 2023, which it expects will increase its product reach and market share.
The company will be expanding its small meals portfolio after a successful trial of to-go products.
The company has successfully launched a new form of packaging that extends the shelf life of food from 5 to 21 days on refrigerated shelves. This is expected to reduce the number of unsold meals at the expiry date and therefore save costs.
The CEO expects that margins may rise to 30% (currently below 20%).
Technical analysis
The IPO took place in 2021, so we already have enough data to evaluate using moving averages and RSI.
Since the beginning of 2023, the company is in a strong growth according to moving averages, the share price has risen several times.
However, due to this growth, the RSI is very much in the overbought zone.
Currently the stock is at all-time highs, there is no resistance. On the other hand, the nearest support on a possible pullback is at $4 per share.
Conclusion
MAMA is a small stock that can grow predatorily. The market segment is underperforming, but the company has obvious value to add at the moment. Customers are buying the products, sales are growing, margins are rising. The weakness may be if customers decide to save more and reach for cheaper supermarket foods than the premium MAMA brand.
The small market capitalization and low number of shares traded daily brings high volatility to the stock. And hence a high percentage appreciation or depreciation on a daily basis compared to other stocks.
The general advantage of a low-priced stock (and $4 per share is a low price) is that for growth in the hundreds of percentages, the stock price does not have to skyrocket into the hundreds or thousands of dollars. A threefold increase means that the share price has climbed to $12 apiece. Coupled with low share volume, such growth is quite possible. Of course, the reverse is also true; a 50% drop means the share price drops to $2, which can be very fast. History knows both cases.