Flowers Foods’s stock price has taken a beating over the past six months, shedding 34.7% of its value and falling to $9.70 per share. This may have investors wondering how to approach the situation.

Is now the time to buy Flowers Foods, or should you be careful about including it in your portfolio? Get the full breakdown from our expert analysts, it’s free.

Why Do We Think Flowers Foods Will Underperform?

Even though the stock has become cheaper, we're swiping left on Flowers Foods for now. Here are three reasons why FLO doesn't excite us and a stock we'd rather own.

1. Demand Slipping as Sales Volumes Decline

Revenue growth can be broken down into changes in price and volume (the number of units sold). While both are important, volume is the lifeblood of a successful staples business as there’s a ceiling to what consumers will pay for everyday goods; they can always trade down to non-branded products if the branded versions are too expensive.

Flowers Foods’s average quarterly sales volumes have shrunk by 1.9% over the last two years. This decrease isn’t ideal because the quantity demanded for consumer staples products is typically stable.

2. Revenue Projections Show Stormy Skies Ahead

Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.

Over the next 12 months, sell-side analysts expect Flowers Foods’s revenue to drop by 1.3%, a decrease from This projection doesn't excite us and suggests its products will face some demand challenges.

3. EPS Trending Down

We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.

Sadly for Flowers Foods, its EPS declined by 21% annually over the last three years while its revenue grew by 3%. This tells us the company became less profitable on a per-share basis as it expanded.

Final Judgment

Flowers Foods doesn’t pass our quality test. After the recent drawdown, the stock trades at 12× forward P/E (or $9.70 per share). This valuation is reasonable, but the company’s shaky fundamentals present too much downside risk. There are superior stocks to buy right now. Let us point you toward one of our all-time favorite software stocks.

Stocks We Like More Than Flowers Foods

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