Reviewing Sanderson Farms (SAFM) & Smithfield Foods (SFD)

Sanderson Farms (NASDAQ: SAFM) and Smithfield Foods (NYSE:SFD) are both non-cyclical consumer goods & services companies, but which is the better investment? We will contrast the two businesses based on the strength of their profitability, earnings, analyst recommendations, valuation, institutional ownership, dividends and risk.

Institutional & Insider Ownership

100.0% of Sanderson Farms shares are held by institutional investors. 5.7% of Sanderson Farms shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Analyst Recommendations

This is a breakdown of recent recommendations for Sanderson Farms and Smithfield Foods, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Sanderson Farms 2 6 2 0 2.00
Smithfield Foods 0 0 0 0 N/A

Sanderson Farms currently has a consensus target price of $129.09, indicating a potential downside of 21.97%.

Valuation & Earnings

This table compares Sanderson Farms and Smithfield Foods’ revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
Sanderson Farms $2.82 billion 1.34 $188.96 million $12.46 13.28
Smithfield Foods N/A N/A N/A ($4,198.95) N/A

Sanderson Farms has higher revenue and earnings than Smithfield Foods. Smithfield Foods is trading at a lower price-to-earnings ratio than Sanderson Farms, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Sanderson Farms and Smithfield Foods’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Sanderson Farms 8.77% 22.21% 18.46%
Smithfield Foods N/A N/A N/A

Dividends

Sanderson Farms pays an annual dividend of $1.28 per share and has a dividend yield of 0.8%. Smithfield Foods does not pay a dividend. Sanderson Farms pays out 10.3% of its earnings in the form of a dividend.

Summary

Sanderson Farms beats Smithfield Foods on 9 of the 10 factors compared between the two stocks.

Sanderson Farms Company Profile

Sanderson Farms, Inc. is a poultry processing company. The Company is engaged in the production, processing, marketing and distribution of fresh and frozen chicken, and also preparation, processing, marketing and distribution of processed and minimally prepared chicken. It sells ice pack, chill pack, bulk pack and frozen chicken, in whole, cut-up and boneless form, under the Sanderson Farms brand name to retailers, distributors, casual dining operators, customers reselling frozen chicken into export markets. The Company, through its subsidiaries, Sanderson Farms, Inc. (Production Division) and Sanderson Farms, Inc. (Processing Division), conducts its chicken operations. Sanderson Farms, Inc. (Production Division) is engaged in the production of chickens to the broiler-stage. Sanderson Farms, Inc. (Foods Division) is engaged in the processing, sale and distribution of chickens. The Company, through Sanderson Farms, Inc. (Foods Division), conducts its prepared chicken business.

Smithfield Foods Company Profile

Smithfield Foods, Inc. produces and markets a variety of fresh meat and packaged meats products both domestically and internationally. The Company operates in four segments: Pork, Hog Production, International and Corporate, each of which consists of a number of subsidiaries, joint ventures and other investments. The Pork segment consists mainly of its three wholly owned United States fresh pork and packaged meats subsidiaries: The Smithfield Packing Company, Inc. (Smithfield Packing), Farmland Foods, Inc. (Farmland Foods) and John Morrell Food Group (John Morrell). The Hog Production segment consists of the Company’s hog production operations located in the United States. On September 2012 (fiscal 2013), the Company acquired a 70% controlling interest in American Skin Food Group, LLC. Effective September 26, 2013, Shuanghui International Holdings Ltd merged with Smithfield Foods Inc, a producer and wholesaler of pork meat products.

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