The Tassal Group Limited (ASX: TGR) share price is down 15.8% in 2020. That’s not good news for shareholders but it could mean a buying opportunity for keen-eyed investors.
Why the Tassal share price is under pressure
The coronavirus pandemic has had a couple of big impacts for Aussie food producers.
On the one hand, supermarket sales have been surging higher in 2020. That means demand for products has surged and seen earnings for downstream producers climb higher.
However, weak export markets and a shutdown of the hospitality industry has hurt potential growth. Tassal still managed to report a solid full-year earnings result with strong retail trade offsetting weaker restaurant revenues.
Tassal reported a 0.3% increase in full-year revenue to $562.6 million with net profit climbing 13.3% higher to $64.2 million.
However, operating cash flow slumped 44.5% to $49.9 million with Tassal expecting prawns to be a big money-maker in FY21.
I also think strong operating earnings before interest, tax, depreciation and amortisation (EBITDA) bodes well for 2021.
The Tassal share price has fallen lower but I think the group has shown it can execute its strategy with a heavy focus on risk management.
Is the Aussie food company in the buy zone?
Tassal shares are trading at a cheap price to earnings (P/E) ratio of 10.4. It’s difficult to compare Tassal given how unique its business is. However, other good primary producing companies are relatively more expensive.
That includes the Bega Cheese Ltd (ASX: BGA) share price. Bega shares are currently trading at a P/E ratio of 54.0 after surging higher in 2020.
The Tassal share price has slumped lower in 2020 but it is also paying a tidy dividend. Tassal shares are yielding 5.1% right now compared to 1.9% for Bega.
Foolish takeaway
The Tassal share price has slumped lower in 2020 but could be back in the buy zone. With a handy dividend yield, strong FY20 earnings and a cheap P/E ratio, Tassal could be a handy portfolio addition.
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More reading
- 3 simple ways to save more cash to buy ASX shares today!
- Why ASX dividend shares are still king in 2020
- Should you buy Bega Cheese (ASX:BGA) shares at near an all-time high?
- 3 ASX 200 dividend shares with 5% yield
- 5 things to watch on the ASX 200 on Monday
Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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