Mama's Creations: A Leading Manufacturer of Deli-Prepared Foods

Mama's Creations, Inc. (NASDAQ:MAMA) is a US-based company that manufactures and sells deli-prepared foods to leading grocery chains and other customers. The company owns brands such as Creative Salads, MamaMancini's, and Olive Dishes. Mama's Creations focuses on producing high-quality products and emphasizes the importance of family values and traditions in its business.

Mama's Creations, Inc. (NASDAQ: MAMA) is a US-based company that manufactures and sells deli-prepared foods to leading grocery chains and other customers. The company owns brands such as Creative Salads, MamaMancini's, and Olive Dishes, focusing on producing high-quality products and emphasizing the importance of family values and traditions in its business. With a strong track record of growth, MAMA is poised for continued expansion.

Growth and Expansion

MAMA has demonstrated significant growth over the past decade, with a compound annual growth rate (CAGR) of 24.6%. The company aims to achieve $1 billion in sales by 2030, which would require revenues to grow at a 42.8% CAGR through the year from the current $128.7 million in total sales [1]. MAMA's growth has been consistent, with a 28.6% CAGR from FY2016 forward. The company's revenue growth in the first quarter of FY2025 was 18.2% year-on-year, driven by cross-selling of new products, improved sell-through, and expanding distribution to Amazon Fresh, Lidl, and Sheetz [1].

Distribution and Market Potential

MAMA currently sells to over 10,000 stores nationally, but there is significant room for growth. The total number of supermarkets and grocery stores in the U.S. at the end of 2024 was 77,000, indicating a substantial distribution runway [1]. The company's expansion into the convenience channel, with recent gains from Walmart Inc. (WMT), Safeway, and Costco Wholesale Corporation (COST), further underscores its growth potential [1]. MAMA is also eyeing The Kroger Co. (KR) and Target Corporation (TGT) for additional distribution gains.

Product Line Expansion

MAMA's product line currently includes proteins, salads, pasta & grains, olives, and sandwiches. The company plans to expand into soups and pizzas, alongside other innovations, to increase shelf space within current sales channels and drive organic growth [1].

Acquisitions and M&A

MAMA aims to realize synergies and accelerate acquired brands' growth through its existing distribution network. The company's operational efficiencies make the M&A strategy attractive. However, achieving the $1 billion sales target would likely require significant dilution through equity raises or substantial debt [1].

Margin Expansion

MAMA's focus on margins is evident, with the company targeting a long-term gross margin level in the low 30% range. The company has recently implemented price increases to offset cost pressures, which should be reflected in the upcoming fiscal Q2 report. MAMA's investments in procurement and production efficiency also contribute to margin gains [1].

Valuation

A discounted cash flow (DCF) model estimates MAMA's fair value at $12.23, 36% above the stock price at the time of writing. The model assumes a 9.5% revenue CAGR through FY2025-FY2035, followed by 3.5% perpetual growth. Gross margin expansion and operating leverage should significantly aid MAMA's long-term margins [1].

Conclusion

MAMA's stock is attractive due to its strong growth catalysts and long-term potential, despite appearing expensive at first glance. The company's distribution gains, shelf space expansion, and lookout for acquisitions create significant growth potential. While the $1 billion sales target is ambitious, MAMA's stock is worth considering for investors seeking exposure to the deli-prepared foods market.

References

[1] https://seekingalpha.com/article/4800360-mamas-creations-worth-the-expensive-price-tag