Dean Foods: Investing In Dairy

Dean Foods is the largest domestic processor and distributor of dairy products. By Joseph Harry.
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I drink a decent amount of milk, so I’m surprised it took me this long to discover Dean Foods (NYSE:DF). The firm owns Berkeley Farms, which provides my local geographical location (Northern California) with fluid milk, such as its Dairy Pure brand – which generally occupies my fridge after every trip to the grocery store. The company is largely a pure play on domestic dairy – a vital staple to many household diets – with milk making up the majority of its sales, as illustrated by the below graphic taken from its 2016 annual report:
I became excited when I also noticed the company was trading at a wide discount to the overall market, so now it’s time to dig into the numbers and decide if DF shares offer value, or are more towards the «value trap» end of the spectrum.
Diving into the fundamentals
The first thing I did was create the below model in Excel using data from the firm’s financial statements, comparing return on invested capital, or ROIC, to its weighted average cost of capital, or WACC.
The headline numbers indicate «good» business to me, but not «great». The high pretax cost of debt jumped out at me, and after taking a look at its BB- S&P credit rating, this made more sense. This relatively high cost is also offset by a high tax rate, however, providing a «tax-shield» that lowers it quite a bit after-tax.
Source: SeekingAlpha

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Así lo expresó Domingo Possetto, secretario de la seccional Rafaela, quien además, afirmó que a los productores «habitualmente los ignoran los gobiernos». Además, reconoció la labor de los empresarios de las firmas locales y aseguró que están «esperanzados» con la negociación entre SanCor y Adecoagro.

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