At time of writing, the share price of Costa Group Holdings Ltd [ASX:CGC] is up 2.99% and trading at $4.64.
This follows a precipitous drop for the stock yesterday after a trading update:
Costa Group share price hit by flat profit
Yesterday, Costa Group issued an unexpected profit downgrade.
It reported that it had ‘experienced subdued demand in a number of categories, namely tomato, berry and avocado during December 2018, and trading conditions in January appear to be slower than planned at this stage. This patchy demand has been reflected in reduced pricing for a number of product lines.’
As a consequence of this, it predicts that it will see ‘largely flat growth for the 12 month NPAT-S to the end of June 2019.’
This is well off the expected low double digit growth it had previously forecast.
As a result, the market went into a selling frenzy yesterday.
Is Costa Group a buy at this stage?
At current levels, the company now has a relatively attractive P/E of 12.5.
It also has a dividend yield of around 3%.
Markets may be indicating that it was over-sold with today’s rise, but it still seems like for the foreseeable future profits will be flat and as a consequence, it may take a significant amount of time before it returns to the $6–7 range.
If you are an income investor, there are a range of dividend stocks available that offer better yields as well as potentially better return prospects.
A list of Money Morning’s ‘Top 5 Dividend Stocks for 2019’ can be found here.
For Money Morning