When it comes to stocks with returns comparable to the marijuana industry, very few people would think of the food industry, which is why Maple Leaf (TSX:MFI) is such a gem, with its stock price increasing 11.3% to date.
This growth outpaces both Canopy Growth (-8% year to date) and CannTrust (-69% year to date). This is very impressive given that marijuana is a growing industry, whereas food is considered more mature.
For those of you living in Ontario in 2008, you may recall the listeria outbreak that affected a Maple Leaf plant in Toronto. Maple Leaf increased its recall of 23 products to 220 packaged meats, with direct costs estimated at $20 million in addition to further costs from lost sales and damaged reputation.
The CEO of Maple Leaf at that time was Michael McCain, who is also the current CEO. He hosted press conferences and issued an apology on its website in an effort to get ahead of the outbreak.
This strategy has allowed Maple Leaf to recover quickly from the incident and gives it a positive image in the community. Investors should purchase shares of Maple Leaf due to the longevity of its CEO and low debt.
Longevity of the CEO
Michael McCain has served as the CEO of Maple Leaf since January 1, 1999. McCain started with McCain Foods in the late 1970s, where he had a variety of experience in many different departments before joining Maple Leaf in 1995.
McCain attended the University of Western Ontario, where he earned an Honours of Business Administration. His experience is focused in the food industry, which has allowed him to grow Maple Leaf into an international food powerhouse.
Business Insider wrote an article detailing the 18 longest-serving CEOs. First place was held by Roger Penske of the Penske Corporation, with 42 years at the top. Based on this list, Michael McCain would place 11th with his 20 years of service. This places him one year behind Ray Irani of Occidental Petroleum and two years ahead of Steve Burd of Safeway.
As an investor, this should excite you, as the longevity of the CEO is indicative of their ability to satisfy its shareholders, which McCain has been able to do for the past 20 years. It should also be noted that a long-serving CEO also suggests the CEO is high caliber, as they have been able to steer the company through rough waters.
For a company as large as Maple Leaf, I’m surprised with how little debt it has taken on. Its total assets are almost triple its total liabilities with a working capital surplus of $253 million.
Working capital is used to determine the excess or deficit of assets to liabilities. A working capital surplus suggests that the company has enough assets to cover its liabilities with additional assets that can be used to grow the revenue.
Of its total liabilities, the company has $403 million in total debt and capital lease obligations. Given that the company did $3.5 billion in sales in fiscal 2018, this amount of debt is miniscule. This is accompanied by $299 million of cash flow from operations.
This is good news for investors, as it indicates that the company is able to make its interest and principal payments, which eliminates default risk – unless a grave unforeseeable event occurs that damages its reputation and hurts sales.
With a CEO that has served for 20 years and a relatively low debt compared to its revenues, Maple Leaf is definitely worth the investment. After all, it has satisfied investors for many years already.
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Fool contributor Chen Liu has no position in any of the stocks mentioned.
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