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This under-the-radar FTSE 250 stock looks great value to me

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A Beyond Meat sausage charcuterie board
Image: Beyond Meat

It seems strange to suggest that a FTSE 250 stock might be flying under many investors’ radars. This is especially true when the index is busy hitting fresh highs. However, I think that might be the case with meat supplier Cranswick (LSE: CWK). Today, I’ll be looking at why I continue to rate this growth stock. 

Meaty sales

As you might expect, Cranswick is a carnivore’s paradise. It supplies pork, gourmet sausages, cooked meats, cooked poultry, hand-cured and air-dried bacon and gourmet pastry products to retailers both here and abroad. And business is good. 

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In today’s Q1 statement, the company said revenue over the 13 weeks to 26 June was up 9.6% on last year, due in part to strong demand from retailers. The FTSE 250 member also said it had seen a “gradual but sustained recovery of the food-to-go and food service channel”.

Exports to the lucrative Far East markets were “well ahead” of sales over the same quarter in 2020 due to higher prices too.

Reasonable price

Looking ahead, Cranswick said its full-year outlook was in line with management’s expectations. That was never likely to send the stock soaring. However, the company’s share price was comfortably in positive territory this morning. Indeed, it’s now getting very close to eclipsing the previous price high of 4,200p.

Despite this, I think Cranswick’s stock still looks reasonably priced. A forecast price-to-earnings (P/E) ratio of a little less than 19, before markets opened, isn’t excessive. For this, I’d be getting a company that boasts a solid balance sheet. It’s also one that continues to invest for growth. With regard to the latter, it’s now successfully raised capacity at its poultry facility in Eye, Suffolk. Production at its new bacon facility in Hull has also commenced.

I’m also attracted to the consistently rising dividends. This tends to be indicative of a well-run, defensive business with predictable earnings.  

Potential threats

I suppose one potential threat to the business is the growing interest in products produced by the likes of US giant Beyond Meat. There’s certainly evidence to suggest that more people have embraced veganism in recent years. 

Having said this, committed meat-eaters are unlikely to make the switch to lab-grown substitutes quickly. Any concerns they may have about how Cranswick may go about its business may also be assuaged by the company retaining its Tier 1 status in the Business Benchmark on Farm Animal Welfare framework for the fifth year running. This essentially means that the FTSE 250 firm is highly regarded for its handling of animals. Interestingly, it is one of only four organisations in the world to receive this accolade. 

From a more general perspective, the argument that I could get faster growth elsewhere is likely true. However, this could require a higher level of risk. That would deviate from my ‘slow and steady’ strategy, especially if it involved buying stakes in headline-grabbing but unprofitable companies. It can often be the case that businesses no one is talking about make for better investments.

Still bullish

Cranswick’s stellar record of steadily improving its owners’ wealth over the years leads me to think that this would still be a great addition to my own growth-focused portfolio. Based on today’s update, the company’s track record, and fair valuation, I’d feel comfortable buying today.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Beyond Meat, Inc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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