Headwinds of persistently high inflation, tight monetary policy, and concerns of a looming recession have put industries under pressure. With food companies expected to face margin pressure from rising raw material costs, investors could look to sell fundamentally weak food stocks BRC Inc. (BRCC) and Save Foods, Inc. (SVFD) before they spoil further.
Although the latest CPI report signaled a cooling of inflation, it still remains well above the Federal Reserve’s target of 2%. A strong jobs growth in March and high inflation will likely bring further rate hikes by the Federal Reserve, increasing fears of the economy falling into a recession.
Moreover, Cleveland Fed President Loretta Mester has said that interest rates will need to rise above 5% given the high prices. With fears of a downturn weighing heavily on investors’ sentiments, it could be best to avoid BRCC and SVFD. Although food stocks tend to be recession-proof, the weak fundamentals of these stocks could lead to downward price pressure.
BRC Inc. (BRCC)
BRCC purchases, roasts, and sells coffee, coffee accessories, and branded apparel in the United States. The company also produces media content; podcasts; and digital and print journals, as well as sells coffee brewing equipment and outdoor and lifestyle gear.
In terms of trailing-12-month EBIT margin, BRCC’s negative 22.49% compares to the industry average of 7.64%. Its trailing-12-month Return on Total Capital of negative 41.11% million compares to the industry average of 6.42%. Likewise, its negative 40.52% trailing-12-month Levered FCF Margin compares to the 2.69% industry average.
For the fiscal fourth quarter ended December 31, 2022, BRCC’s loss from operations widened 378.3% year-over-year to $19.46 million. Its net loss widened 334.8% year-over-year to $20.03 million. Additionally, its adjusted EBITDA loss widened significantly year-over-year to $11.42 million, while its net loss per share came in at $0.09.
Over the past year, the stock has fallen 65.1% to close the last trading session at $5.21.
BRCC’s weak fundamentals are reflected in its POWR Ratings. The stock has an overall rating of F, which translates to a Strong Sell in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It is ranked #77 out of 79 stocks in the Food Makers industry. It has an F grade for Quality and a D for Stability and Sentiment.
We have also given BRCC grades for Growth, Value, and Momentum. Get all BRCC ratings here.
Save Foods, Inc. (SVFD)
Headquartered in Hod HaSharon, Israel, SVFD, an agri-food tech company, develops and sells eco-friendly green treatments for the food industry to enhance food safety and shelf life of fresh produce.
In terms of trailing-12-month Return on Common Equity, SVFD’s negative 93.10% compares to the industry average of 11.44%. Its trailing-12-month Return on Total Capital of negative 58.69% compares to the industry average of 6.81%. Likewise, its negative 88.41% trailing-12-month Return on Total Assets compares to the 5.21% industry average.
SVFD’s revenues from sales of products for the fiscal year ended December 31, 2022, declined 10.1% year-over-year to $394K. The company’s operating loss widened 23.7% year-over-year to $5.82 million. Its net loss attributable to the company’s shareholders widened 19.1% year-over-year to $5.74 million. Moreover, its loss per share narrowed by 20.4% year-over-year to $1.64.
Over the past year, the stock has fallen 85.6% to close the last trading session at $0.75.
SVFD’s POWR Ratings reflect its grim outlook. The stock has an overall rating of F, equating to a Strong Sell in our proprietary rating system.
It is ranked #78 in the same industry. Additionally, it has an F grade for Value and Stability and a D for Quality.
To see the additional ratings of SVFD for Growth, Momentum, and Sentiment, click here.
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BRCC shares . Year-to-date, BRCC has declined -14.73%, versus a 9.17% rise in the benchmark S&P 500 index during the same period.
About the Author: Malaika Alphonsus
Malaika's passion for writing and interest in financial markets led her to pursue a career in investment research. With a degree in Economics and Psychology, she intends to assist investors in making informed investment decisions.
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