Investing

Mamamancini's Tasty Q1 Feeds Investor Appetite to Extend 6-Month Rally

Ben Ward

Published: June 14, 2023 6:55 am

Last Updated: June 14, 2023 11:21 am

Deli foods producer Mamamancini (US:MMMB) shares look set to continue their astonishing six-month rally on Wednesday after the company reported a strong first quarter. MMMB stock added 6.5% in after hours trading on Tuesday, signaling that investors think the shares have more in the tank even after a period of impressive growth and profitability.

The company’s continued expansion of sales and a solid improvement in its profit margins resulting from cost reductions have fueled the 90%-plus gain in the Nasdaq-traded shares since mid-December.

That six-month increase stoked a boost in MMMB stock’s Fintel Momentum score, currently 92.53, which ranks the shares at 904 out of 42,385 global stocks analyzed.

Outpaced Analysts

During the first quarter of fiscal 2024, Mamamancini’s generated 6% sales growth to $23.1 million and outpaced analyst forecasts by $1 million.

Gross profits expanded by 65% as the company increased its revenue generation while reducing its cost of sales, driving profit margins higher. The improvement in gross margins can be attributed to several factors, including the normalization of commodity costs, successful pricing actions, and operational efficiencies implemented throughout the organization.

The cash generated from operations continues to grow as shown in a table and chart from the Fintel’s financial metrics and ratios page for MMMB.

The table will show an updated picture in the next day or so when the financials filter through the platform, however it is already evidently clear that the company has reshaped its operations to grow positive cash flows while also reducing investment spending.

The group’s underlying profits measured by adjusted EBITDA grew by 357% over the year to $2.5 million from $0.7% million in the prior year and beat consensus forecasts that expected a figure of around $1.2 million. While operating expenses for the business also grew by 23% over the year to $4.4 million, the company was able to reduce the costs of sales to offset this.

On the bottom line, Mamamancini’s net income for Q1 soared from $0.1 million in 2022 to $1.4 million or earnings of four cents per share for investors, doubling market expectations for two cents per share.

Consistent Outperformance

A chart from Fintel’s Earnings page for MMMB shows the track record of results against expectations in the market for the quarters dating back to July 2020.

Performance over the last few quarters has continued to show outperformance against forecasts in the market, seen as a very bullish indicator.

Mamamancini’s strategic initiatives and operational highlights further reinforce its position as a promising investment opportunity. The company recently appointed Lauren Sella, a former executive at Mondelez (US:MDLZ), as its chief marketing officer, leveraging her extensive experience across renowned brands.

The producer’s participation in the prestigious IDDBA 2023 trade show earlier this month showcased its commitment to innovation, with the introduction of Mama’s Creations, a new international deli foods platform brand offering diverse cuisine optionsNew products in the line include General Tso’s Chicken, vegetarian Chana Masala, Beef Fajitas, Korean-Inspired Meatballs.

The company also expanded its product line with on-the-go snacking options, increasing shelf life and capturing new dining occasions.

Effective Management

When using Fintel’s management effectiveness dashboard to analyze recent performance, Mamamancini’s leadership stacks up quite well.

The analysis uses several traditional performance measures such as ROA, ROE and ROIC to track true performance. The operating cash return on investor capital (OCROIC) measures how much cash the company generates from its invested capital.

While the data prior to 2022 was skewed with some outlier figures, if we focus on the recent performance over 2022 and leading into 2023, the improvement in OCROIC helps show that the company is utilizing its resources more efficiently. We take this as generally a positive sign for investors that management is delivering on its promises with operational performance to back its actions and choices.

The OCROIC has risen to its best level in two years at 0.02 after being negative over most of 2022.

One-Stop Deli

Mamamancini’s expansion of its branded sleeve product line and its successful cross-selling efforts have shown success in management’s ability to penetrate new markets and secure partnerships with major grocery chains.

By continuously seeking opportunities for growth and leveraging its expertise in the deli food sector, Mamamancini’s aims to become a national one-stop-shop deli solutions provider.

With plans to transition its corporate name to Mama’s Creations and adopt the new stock ticker ‘MAMA,’ the company is positioning itself for continued success and increased market share.

“This gives us the opportunity to launch an incredibly wide array of in-demand products into grocers nationwide, staying true to our vision of fresh, clean and easy to prepare meals, further enabling us to drive incremental SKUs into our grocer customers,” Adam Michaels, the company’s chairman and CEO, said.

Rising Quant Scores

Fintel’s QVM (quality, value and momentum) indicator gives MMMB stock a score of 63.01, on the threshold of joining the leaderboard.

The stock excels in the quality (cash generating abilities) segment, with a score of 71.47, and the momentum segment with a score of 92.53. Where the stock lacks is in the value segment with a score of 49.56 which drags down its overall rank.

If the company can continue to scale positive net profit growth, the valuation prospects for the stock should continue to become more attractive.

As economic pressures prompt consumers to seek convenient and affordable meal solutions, Mamamancini’s has positioned itself ahead of this trend, offering a wide range of high-quality, easy-to-prepare foods that cater to evolving consumer tastes.

The company’s success in introducing new products, expanding its customer base, and its ongoing initiatives to improve gross margins should help drive sustainable value generation for shareholders backing this story.

This article originally appeared on Fintel