Ingles Stock

ingles stock shareholder equity

About Ingles Grocery:

Ingles is a grocery store chain in the South Eastern United States. I used to shop there years ago; however, my local store closed down about 8 years ago and now there isn’t one near me. They used to have some really great Country Ham (ok, I know this is about stocks, what can I say, I’m hungry!).

This company has approximately 190 stores with 107 fueling centers. It is a smaller grocery store chain and is regional based, so it lacks the diversification of larger more national grocery chains.

You can find out more on their website:

Ingles Financial Press Releases

What’s Ingles stock price looking like?

Not counting the dividend, Ingles is up 41% over the last 52 weeks. It’s only down about 5.7% over the last month. This is compared to -7% for the S&P 500 for the last month. At the moment, that is some big out performance from this grocery store stock.

I personally started buying Ingles stock at the beginning of February. Overall, I’m at about break even because I’ve continued to add throughout the year. I got in this stock a bit late (so I didn’t catch the mass run up). I do have portions up 8% or so.

Why Did I buy it?

I started buying this stock after discovering it on one of my screens. LOW P/E value, high Return on Equity, great Revenue and earnings growth, and debt levels not too bad. I also feel it is a pretty safe stock during a recession as people have to eat regardless. I realize that’s a silly argument because well, “it’s priced in.” However, I was mostly drawn to the companies valuation and strong fundamentals. I think the necessity of food does help the company weather the storms that other sectors may not.

Speaking of which, here are those fundamentals:

Fundamentals

  • P/E of 5.79
  • P/Book of 1.23
  • Profit Margin 5.18%
  • Return on Equity 28.12%
  • Earnings growth YOY 31.5%
  • Revenue growth 16.3%
  • Dividend Yield .77%
  • Payout ratio 4.52%

A few comments about the fundamentals of Ingles stock

P/E and P/Book are low. For comparison, Kroger currently has a P/Book of 3.65 and Sprouts has a P/B of 2.55. Therefore, Ingles has the lowest valuation in class.

DEBT-Ingles has reduced it’s Long-term debt considerably since the Pandemic crash. At the moment, it has about .56B in Long-term debt on its books. This is only around 55% debt to equity; much lower than Kroger as well.

Shareholder Equity has basically been increasing since 2015. Last quarter saw a whooping 32.5% growth in shareholder equity quarter to quarter. Even if you take out 2020, you can see the overall trend is upwards . Here is the chart from macrotrends.net

Data from MACROTRENDS.net

Also notice the tremendous uptick in return on equity. It’s basically been going up for most of the decade, a condition accelerated by the pandemic.

It is a grocery store, so you should know going into it, the margins will not look great. However, Ingles’ profit margins increased greatly during the pandemic. I guess the main question is whether or not they can continue with these profit margins. For comparison, Kroger has a profit margin of only 1.2% with a ROE of 17%, so, Ingles’ management is just doing a better job right now. Sprouts fares a little better than Kroger with a 4% profit margin.

In summary, you have a stock who has a lower valuation and a higher profit margin than those in its class-Perhaps a recipe for Success?

Here are the Margins chart from Macrotrends.net again. Can they keep this going?

Margins for the grocery store!

Ingles Dividend

Ingles isn’t much of a dividend stock, you aren’t even getting a 1% yield. This stock is like some hodge podge between value and growth. However, please be aware there is a weird stipulation with Ingles. Something in their debt covenants prevents them from currently raising their dividends. So, if you check on their dividend growth history you’ll be disappointed. At the same time, one day when those debts are fulfilled, I can see them growing their dividend at a hefty rate; the payout ratio is almost nothing.

Stock Technicals:

Right now the 200 DMA is 81.8; so the price remains firmly above the 200 DMA. I think until we see it creeping into the 83 mark, Ingles from a momentum perspective is still looking like a solid stock, even during this possible recession. I’m personally taking nibbles here and there at the stock, very small orders. I already bought a good bit earlier and I have almost as much as I’m comfortable holding in my IRA account.

Concerns

The obvious concerns is with rising inflation, a labor shortage with rising wages, how much will this eat into their profits? I think groceries is one of those things, the consumer will have to pay whether they want to or not. Moreover, Ingles isn’t a more luxurious grocery store like Whole Foods or even Publix, where the consumer can say, I’ll go somewhere cheaper.

Ingles is known for being in areas with middle and lower income class people. There’s really is no other option for these people other than Aldi’s (which hasn’t branched out entirely to it’s areas yet). I do know in the rural counties in my state, you go to Ingles or you basically starve (unless you are buying stuff at the Dollar General). I’d say that is a pretty good moat, one that I don’t see being disrupted any time soon.

The thing that remains to be seen is what kind of impact a fading stock market will have on it. Whether investors continue to hold Ingles at these prices. I guess we shall see. For now, I remain quite bullish on Ingles.

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