What a fantastic six months it’s been for Bunge Global. Shares of the company have skyrocketed 51.8%, hitting $119.94. This performance may have investors wondering how to approach the situation.
Is now the time to buy Bunge Global, or should you be careful about including it in your portfolio? See what our analysts have to say in our full research report, it’s free.
Why Is Bunge Global Not Exciting?
Despite the momentum, we're swiping left on Bunge Global for now. Here are three reasons there are better opportunities than BG and a stock we'd rather own.
1. Long-Term Revenue Growth Disappoints
A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Regrettably, Bunge Global’s sales grew at a sluggish 1.5% compounded annual growth rate over the last three years. This was below our standards.
2. EPS Trending Down
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Sadly for Bunge Global, its EPS declined by 19.1% annually over the last three years while its revenue grew by 1.5%. This tells us the company became less profitable on a per-share basis as it expanded.
3. Short Cash Runway Exposes Shareholders to Potential Dilution
As long-term investors, the risk we care about most is the permanent loss of capital, which can happen when a company goes bankrupt or raises money from a disadvantaged position. This is separate from short-term stock price volatility, something we are much less bothered by.
Bunge Global burned through $879 million of cash over the last year, and its $15.65 billion of debt exceeds the $1.14 billion of cash on its balance sheet. This is a deal breaker for us because indebted loss-making companies spell trouble.
Unless the Bunge Global’s fundamentals change quickly, it might find itself in a position where it must raise capital from investors to continue operating. Whether that would be favorable is unclear because dilution is a headwind for shareholder returns.
We remain cautious of Bunge Global until it generates consistent free cash flow or any of its announced financing plans materialize on its balance sheet.
Final Judgment
Bunge Global isn’t a terrible business, but it doesn’t pass our bar. After the recent surge, the stock trades at 14.4× forward P/E (or $119.94 per share). While this valuation is reasonable, we don’t really see a big opportunity at the moment. We're pretty confident there are more exciting stocks to buy at the moment. We’d suggest looking at one of our top software and edge computing picks.
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