Why Mama's Creations Stock Surged Today
Key Points
Mama made a game-changing acquisition.
The company's adjusted earnings more than doubled in the third quarter.
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Shares of Mama's Creations (NASDAQ: MAMA) leaped 28% on Tuesday after the deli-prepared food maker reported impressive growth metrics.
Image source: Mama's Creations.
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A crowning achievement
Mama's third-quarter revenue rocketed 50% higher year over year to $47.3 million, fueled by double-digit organic sales growth and the company's recent acquisition of Crown 1 Enterprises.
Mama purchased Crown 1's assets from food distribution giant Sysco in September for $17.5 million in cash. The protein and ready-to-eat meals manufacturer brings $56 million in annual revenue, new customers, cross-selling opportunities, and additional grill capacity.
"Revenue growth again outpaced the category, accelerating our market share gains, supported by balanced geographic expansion, disciplined trade and marketing promotion investments, and new wins across multiple channels," CEO Adam Michaels said during a conference call with analysts.
Moreover, Mama's profitability improved as it scaled its operations. Its gross margin rose to 23.6% from 22.6% in the prior-year period. Mama's net income, in turn, jumped 31.7% to $540,000.
Better still, Mama's adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA), which strips out stock-based compensation and acquisition-related costs, soared 118% to $3.8 million.
Mama has plenty of room to grow
Mama has a promotion currently underway with Costco that should drive sales and increase brand awareness. Additionally, Mama secured two promising national placements at Target and Food Lion that are also expected to boost sales in the coming months.
Looking further ahead, Michaels sees a path to $1 billion in annual revenue.
"With expanded capacity, access to premium retail accounts, and ongoing grandma-quality innovation, we are well-positioned to drive sustained profitable growth and improved margins in the quarters to come," Michaels said.
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Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale, Sysco, and Target. The Motley Fool has a disclosure policy.
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