Bunge Global’s 32.9% return over the past six months has outpaced the S&P 500 by 19.7%, and its stock price has climbed to $123.36 per share. This was partly due to its solid quarterly results, and the run-up might have investors contemplating their next move.
Is there a buying opportunity in Bunge Global, or does it present a risk to your portfolio? See what our analysts have to say in our full research report, it’s free.
Why Is Bunge Global Not Exciting?
We’re glad investors have benefited from the price increase, but we're sitting this one out for now. Here are three reasons why BG doesn't excite us and a stock we'd rather own.
1. Long-Term Revenue Growth Disappoints
A company’s long-term sales performance is one signal of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Regrettably, Bunge Global’s sales grew at a mediocre 6.5% compounded annual growth rate over the last three years. This was below our standard for the consumer staples sector.
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 17% annually over the last three years while its revenue grew by 6.5%. 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 $1.16 billion of cash over the last year, and its $16.19 billion of debt exceeds the $839 million 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’s business quality ultimately falls short of our standards. With its shares beating the market recently, the stock trades at 12.3× forward P/E (or $123.36 per share). This valuation multiple is fair, but we don’t have much faith in the company. We're fairly confident there are better stocks to buy right now. Let us point you toward one of our all-time favorite software stocks.
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