Shares of Cal-Maine (CALM) have gained 80% this past year. While it may be surprising that a producer of eggs and egg products posted a scorching performance in a year otherwise dominated by AI, tech stocks, and crypto, the results show Cal-Maine was a major winner nonetheless. And here’s what’s even more surprising — it’s still an attractive buy, even after this impressive run.
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I’m bullish on shares of Cal-Maine based on its strong recent performance, strong positioning in the current consumer environment, favorable long-term positioning, inexpensive valuation, and above-average dividend yield.
What Is Cal-Maine?
Based in Mississippi and founded in 1957, Cal-Maine is the largest producer and seller of fresh eggs in the United States. It sells eggs, egg products, and several other foods under brands that include Egg-Land’s Best, Farmhouse Eggs, Land O’ Lakes, Sunups, Sunny Meadow, and more.
Cal-Maine sells its products to blue-chip customers like Walmart (WMT), Costco (COST), Publix, and others.
Cal-Maine Is Well-Positioned for the Current Environment
As a major producer of eggs, Cal-Maine is well-positioned for the current economic environment, in which many consumers are feeling the pinch of inflation. Eggs are widely viewed as an inexpensive source of protein, something that everyone needs.
And while the price of eggs has gone up, it hasn’t gone up as much as it has for many other foods, particularly when compared to other common protein sources like meat. Cal-Maine points out that a ‘standard serving size’ of one egg is about half the price of four ounces of chicken and less than a fifth of the price of a quarter pound of beef, making them a go-to option for consumers in challenging economic times.
Also Well-Positioned for the Long Term
Being a cheap, protein-dense option makes eggs an appealing choice for consumers in the near term, but eggs are also well-positioned for the long term. An incredible 97% of U.S. households buy eggs, making them as close to a universal choice as you’ll find in modern-day America. Additionally, eggs are slated to be designated as a “healthy food” under new proposed guidelines from the FDA, which will further burnish their reputation as a cheap, nutritious source of protein.
Unlike other food makers, I’m also not overly concerned about the threat presented to Cal-Maine by weight loss drugs like GLP-1s. It is well-known that users of these drugs need to be mindful about protein consumption in order to not lose muscle mass, which is good news for a maker of a popular source of protein like Cal-Maine. All of these factors help to put Cal-Maine in a strong position for the long term.
Going Cage-Free
Many consumers prefer cage-free eggs, and Cal-Maine also notes that 10 states have mandated cage-free egg production by 2030. However, Cal-Maine is already positioning itself for this changing environment by allocating capital towards ramping up its own cage-free production and acquiring cage-free producers.
Attractive Valuation
Even with its strong performance over the past 12 months, Cal-Maine looks like an attractive buying opportunity because shares are still quite cheap. In fact, with a valuation of just 12.1 times 2025 consensus earnings estimates, Cal-Maine trades at barely half the multiple of the broader market. The S&P 500 (SPX) currently trades for 25.8 times earnings, nearly double the valuation Cal-Maine enjoys.
Intriguing Dividend Policy
Not only is Cal-Maine cheap, but it’s also an intriguing dividend stock with an attractive forward yield of 3.8%. This means that Cal-Maine’s dividend yield is roughly triple that of the S&P 500, which currently yields just 1.2%.
It’s worth noting that Cal-Maine utilizes a variable dividend policy designed to otpimize returns to shareholders through economic cycles and to preserve capital. In quarters where the company reports net income, its policy is to pay out one-third of this income to shareholders in the form of dividends, so the dividend can vary widely from quarter-to-quarter and year-to-year based on the performance of the business.
Therefore, Cal-Maine is not necessarily the textbook ‘Dividend King’ with a 50-year track record of making and raising its dividend payouts, but it can pay out some very nice quarterly dividends when income is strong. For example, the company just paid out an attractive dividend of $1.02 during the most recent quarter.
Is CALM Stock a Buy, According to Analysts?
Turning to Wall Street, CALM earns a Moderate Sell consensus rating based on zero Buys, one Hold, and one Sell rating assigned in the past three months. The average CALM stock price target of 82.00 implies 20.8% downside potential from current levels.
An Egg-cellent Choice
Cal-Maine has flown under the radar of many investors this year despite its strong performance. The good news is that even after gaining 80%, the stock still looks like an attractive investment opportunity based on its cheap valuation, as shares trade at roughly half the market multiple.
I’m bullish on Cal-Maine based on this inexpensive multiple, its strong position in the current environment where consumers are challenged by inflation and looking for cheap and nutritious choices, its favorable long-term outlook, and its attractive dividend policy, which can lead to substantial dividend payouts during periods of strong performance.
