Ag Growth International Inc. (TSX:AFN) is “riding the tailwinds of an agricultural super cycle,” said one analyst
Capital Ideas Media | April 30, 2021 | SmallCapPower: With the yield on the 10-Year U.S. Treasury note steadily climbing during the past few months, much of the business media has been talking about inflation.
(Originally published on Capital Ideas Media on March 23, 2021)
If you as an investor are concerned about the potential impact of inflation on your portfolio, then you might want to consider adding hard assets, which have historically performed well in an inflationary environment.
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Real estate is a good example of a hard asset, especially arable land that is needed to feed a growing global population.
One way in which we believe investors can participate in the growth of agriculture, without actually buying a farm, is through owning shares of companies such as Ag Growth International Inc. (TSX:AFN).
Ag Growth is a Canadian company, with global operations, that is considered a food infrastructure play, bringing its IoT technology to improve agricultural operations and maximize profits from seed to food processing. Its equipment and services, meanwhile, help facilitate the storage, blending, mixing, conveying, conditioning, and processing of agricultural inputs and produce.
The Company is also involves in supply-chain management, devising a system that connects processors, merchandisers, and grain buyers directly to farms.
Following what he called a “strong” fourth-quarter earnings beat, Desjardins Securities analyst David Newman views Ag Growth as being “transformed into a fundamentally stronger, less cyclical and more predictable business as it expands across products and market.”
And, the analyst now sees Ag Growth “riding the tailwinds of an agricultural super cycle,” with backlogs currently up 40 per cent year over year.
Mr. Newman also noted that debt reduction remains a key priority for the Company in 2021, as he expects Ag Growth to leverage its recent investments to drive growth, improve margins, and accelerate value creation.
The Desjardins Securities analyst recently raised his target price on AFN to $57 per share from $50, while maintaining his “Buy” recommendation, as he believe the value should be reflected in Ag Growth’s share price over time as SureTrack (its technology platform) grows, backstopped by a large total addressable market, rapid agricultural technology adoption, unique competitive advantages and a scalable omnichannel sales approach.”
After reporting its most recent financial results, Ag Growth International said it is likely to benefit from the “favourable tailwind” of increasing crop prices during 2021, with China expected to drive the markets for beef, pork, poultry and corn.
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