Company Profile: Lifeway Foods, Inc.

LWAY:  Nasdaq

I first came across the kefir product of Lifeway Foods, Inc. (Lifeway) in our grocery store a few years ago.  I bought it because it had less sugar than the competing kefir products.  At that time, I had heard of kefir but had never tried it.  I actually quite liked it and I continue to buy kefir from other brands because I can’t find Lifeway brand any longer where I live.  I see their website does have a submission form where you can request they look into selling their product in stores near you so I may fill that out.

Nonetheless, the company intrigued me because of the fact kefir seemed to be a new product on the grocery shelves and this one had quite a bit less sugar than the competition which is something I appreciate.  It seems like kefir and probiotics are a food trend that may stick around for a bit.  Let’s check it out.  

[The information below is only current to the day this post was published so please update the ratios and numbers to the current day before relying on them as they may have significantly changed (see How to Evaluate a Stock- Part One for information on where to find the ratios and numbers online). Please read my Legal Disclaimer before reviewing this post.  Also, I do not own Lifeway stock and am not affiliated with them in any manner.] 

What is Lifeway? 

Lifeway is primarily a company selling kefir products and employs 300 people.  It trades on the Nasdaq (America's second largest stock exchange behind the New York Stock Exchange).  Kefir is a fermented milk drink that originated in the Caucasus Mountains.  It tastes like a fizzy milk and can be compared to yogurt.  It is very nutritious as it contains probiotics which have garnered a lot of attention these days across the food industry.  Lifeway’s website indicates that it has the #1 market share in probiotic dairy products.  It has some interesting products like ProBugs which is kefir for kids, Biokefir and even Frozen Kefir!  To that end, interestingly enough they have a chain of frozen kefir cafes in the Chicago area and their frozen kefir can be found in the Freshii chain of stores.  If someone has gone to one of these cafes let us know what frozen kefir tastes like!  It also looks like they recently launched an organic Icelandic yogurt which from my experience with other brands, is an extremely thick yogurt.  So, the company is certainly knowledgeable and entrenched in the kefir market.      

Sample of LIfeway products- photo courtesy of Lifeway website

Sample of LIfeway products- photo courtesy of Lifeway website

What is Lifeway’s stock doing?

As at October 19, 2017, the numbers from our basic stock evaluation tools are as follows (I mainly used Morningstar and The Wall Street Journal Online for these figures, both sites are good):

Share price: $10.16 USD

The share price alone doesn’t tell us much other than how much you could afford to buy.  One share would cost you $10.39.

Price to Earnings (P/E): 103.1

Recall this is the stock price divided by the earnings per share.  If the P/E is high, you should expect to get some growth for having paid a bit more for the stock however, it could indicate the stock is overvalued.  The industry average here according to Morningstar is 25.4 so Lifeway is considerably higher than the industry average.  To put this figure into perspective, the market is giving Lifeway a value equal to 100 years of its earnings.

Dividend Yield: No dividends paid at this time

Dividend paying stocks are something many investors look to buy as they are like an interest rate on your shares.  Dividend payouts are discretionary.

Earnings per Share (EPS): $0.22

This figure will tell you a great deal about the growth of the company.  It takes what the company earns and divides it by the number of shares outstanding.  It is essentially the profit allocated to each share of the company.  The bigger the number the better because the more the company earns, the more attractive it is to investors.  EPS that is increasing every quarter shows earnings momentum and shows growth potential. 

Lifeway shares earn $0.22 per share.  I couldn’t find data on whether their EPS is increasing over the past few quarters so cannot comment on that aspect.

Revenue: $123.88 Million

Increasing revenue is a good sign that the company is growing.  If you look at past revenue figures, Lifeway’s Revenue has grown every year from $39 Million to $124 Million today.

Return on Equity: 7.43% (end of 2016)

This figure tells you what sort of return the company is getting on the shareholders money.  An increasing ROE is a good sign.  Lifeway’s ROE for 2015 was 4.38%.     

Market Capitalization: $166.69 Million

This indicates Lifeway is a small cap stock.  Recall that small cap stocks usually have the most room for growth as opposed to large, established, stable large cap companies.

Net Profit Margin: 2.81% (end of 2016)

This ratio tells us what profit is left over after the company pays its expenses for the year.  The more money it keeps, the better.  High net profit margins mean that a company is good at keeping profit after expenses are paid, which may mean they are adept at keeping their expenses down.  It is a good idea to compare these over an industry to see what companies are good at operating and maintaining a high net profit margin.

Here, Lifeway is keeping about 3 cents of profit for each dollar of sales.     

Cash Flow per Share: $0.07

Recall that this number is the cash flow through the business divided by the number of shares outstanding.  It represents the net cash a company can produce per share and many investors consider this a better indicator of a company’s health than the more popular, earnings per share ratio.  A higher value usually indicates the company is in a healthier position. 

This ratio should be considered along with the EPS figure for a better picture of the company’s health as there should not be a wide discrepancy between the two figures.  If there are large variances between those numbers, you may want to consider if there were large, non-recurring one-time items that account for the large variance.    

Price to Sales (P/S): 1.3

This ratio compares the total market value of the company with its sales revenues.  There is not a great deal of manipulation a company can do with its sales data so this can be a good indicator of how well the company is doing.  Recall that a lower ratio relative to its peers in the industry can indicate a potentially good investment opportunity.  Morningstar indicates the industry average is 1.8.

Price to Book (P/B): 3.3

This compares the stock price with how much the stock would be worth if the company was liquidated or sold off. If the ratio is greater than one, you are paying more for the stock than the stock’s liquidation value.  Lifeway is at 3.3.

Price to Cash Flow (P/CF): 25

Having cash left over after expenses are paid off is crucial to remaining in business so this is a good indicator about the health of a company.  Generally lower is better as it could indicate the company is obtaining large cash flows not yet reflected in the stock price.  Morningstar indicates the industry average for this industry is 14.6 whereas Lifeway is at 25. 

So, there you have it…a basic evaluation of Lifeway.  Interested in finding out more?  There are tons of articles and discussions online about this stock and all stocks so they are also a good place to look at for further consideration.  Lifeway is no doubt in an interesting and up and coming area of the food industry.  I will continue to drink my kefir and see where this sector and company goes!

*Photo by Ryan Song on Unsplash