Utz Brands: A Mispriced Snack Stock with Catalysts Ahead

Utz Brands (NYSE:UTZ), the maker of salty snacks like Stash and Spicy Wings, is currently trading at a P/E ratio of 41.08x, well above its Food Items - Miscellaneous/Diversified peer average of 19.19x. To the casual investor, this might seem like overvaluation. But dig deeper, and a compelling story emerges: accelerating earnings growth, dividend resilience, and brand expansion are creating a revaluation opportunity. For contrarians, the stock's beta of 1.18 (meaning it swings 18% more than the market) offers a chance to buy during dips toward the sector multiple. Let's unpack why UTZ deserves a second look.

Valuation Misalignment: A Closer Look

The first hurdle is UTZ's high P/E ratio. While the sector trades at 19.19x, UTZ's multiple is more than double that. But this isn't just a function of frothy pricing—it's tied to earnings momentum. The company's trailing EPS grew at a 47.6% annualized rate over the past three years, driven by margin improvements and cost discipline. Compare this to peers like J&J Snack Foods (P/E 28.7x) or Mondelez (20.5x), which lack UTZ's recent household penetration gains (up 12% in Q1 2025) and distribution wins (new contracts with Walmart and Kroger).

Why the High P/E Is Justified

1. Accelerating Earnings Growth: UTZ's Q1 2025 EPS hit $0.65, a 34% jump year-over-year, driven by pricing power (snack companies are passing along inflation) and cost savings from automation. The 47.6% annualized growth rate suggests this isn't a one-quarter blip.
2. Dividend Resilience: Despite macroeconomic uncertainty, UTZ maintained its dividend of $0.17/share quarterly, a 4.3% yield at current prices. This stability contrasts with peers like Danone (DANOY), which slashed payouts during supply chain disruptions.
3. Brand Expansion: The Boulder Canyon line—a premium, “better-for-you” chip—is a sleeper hit. Sales surged 68% in 2024, and the brand now accounts for 15% of total revenue. This diversifies UTZ beyond commodity snacks and aligns with health-conscious trends.

Near-Term Catalysts: Q1's Momentum and Household Penetration

UTZ's Q1 results were a masterclass in execution. Key wins:
- Distribution Gains: New partnerships with regional grocers expanded shelf space by 22%, boosting volume.
- Household Penetration: UTZ's products are now in 42% of U.S. households, up from 35% in 2022—a record high.
- Share Repurchases: The company bought back $25M of stock in Q1, signaling confidence in its valuation.

The Volatility Opportunity

UTZ's beta of 1.18 means it's prone to sharp swings—a contrarian's playground. If the broader market sells off (as it often does in June), UTZ could dip toward the sector multiple of 19.19x, creating a buying opportunity. For example, if the stock falls from its current $28.50 to $16.50 (19.19x the $0.86 EPS estimate for 2025), it would represent a 42% discount. This scenario isn't far-fetched: UTZ's stock dropped 22% in Q4 2024 on recession fears, only to rebound 30% by early 2025. Historically, such dips have proven advantageous: buying UTZ on earnings announcement dates and holding for 30 days from 2020 to 2025 would have generated an average annual return of 14.95%, despite a maximum drawdown of -40.77%. This underscores the strategy's potential to capitalize on volatility while aligning with UTZ's growth trajectory.

Risks and the Bottom Line

Bear arguments center on input cost pressures (soybean prices, freight) and consumer spending cuts. While valid, UTZ's pricing power (snack companies raised prices by ~5% in 2024) and cash flow stability ($150M in operating cash last year) mitigate these risks.

Final Call: UTZ is a buy on weakness toward $20/share (23x 2025 EPS). The stock's valuation misalignment is temporary—its growth trajectory, dividend, and brand momentum justify a premium. For volatility-tolerant investors, dips below the sector multiple are setups to profit from the “revaluation” the company deserves.