Maple Leaf Foods’ Shareholders are Tasting an 80% Gain This Year

To my surprise, Maple Leaf Foods (“MFI”) has been our strongest performer this year, up nearly 80%.

On February 26, 2024, we started buying MFI for clients at $22.82. At the time, the stock was about as unpopular with investors as I was with the ladies in high school. Just two trading days earlier, a weak earnings report had triggered an 11% plunge, leaving shares almost 38% below their 2017 peak.

Our research led us to believe the company would follow through on its promises. We built our investment thesis around three core points.

1. Margin improvement. Although management projected margins would rise to 14–16%, they were below 9% at the time. Analysts were skeptical of the math and doubted it could be achieved.

2. Valuation cheaper than peers. MFI was trading at a 38% discount to Hormel Foods, which had 11% margins, and 19% below Premium Brands, with 8% margins—an unusually wide gap. After all, all three are protein-focused food companies that lean on strong, trusted brands to fuel growth.

3. Substantial cash generation. Future cash flow was set to benefit from a $1 billion investment in two new facilities in London, Ontario, and Winnipeg, Manitoba. With construction now complete, the $130 million in cost savings we expected from these plants could be used to reduce debt and return capital to shareholders through dividends and buybacks. Having raised the dividend every year since 2015, management had shown a strong commitment to rewarding shareholders in both good times and bad, a trend we expected to continue.

After buying the stock at $22.82, it briefly dipped below $20, but eighteen months later it has risen to $35.48. With $1.36 in dividends, clients who participated in the initial block trade have earned over a 60% total return.

Margin Improvement ✅

The company is moving toward the 14–16% margins we always believed it could achieve. Last quarter, it reported a 13.3% margin, up from 11.2% a year earlier.

Valuation is Cheaper than Peers ✅

The last three quarters have delivered outstanding results, with the stock jumping 11% (February 25), 6% (May 8), and 9% (August 7) the day after each earnings release.

Investor confidence has pushed the valuation higher. At 8.4x enterprise value to EBITDA (which is a ratio that shows how much a company is worth—including debt—compared to the cash it generates from operations) MFI still trades at a 28% and 15% discount to Hormel Foods and Premium Brands, respectively. While narrower than in February 2024, we believe MFI should trade at little to no discount compared with these peers.

Substantial Cash Generation ✅

Cash flow has grown exactly as expected. After covering expenses and capital investments, the remaining free cash flow amounts to about 11% of the stock’s market value, up from 6% in 2024.

Debt, which once reached about $1.8 billion, has dropped to $1.3 billion, and compared to the company’s regular cash earnings, it’s nearly half of what it was in February 2024.

The company continues to raise its dividend, a pattern we expect to continue.

Share repurchases offer another way to return cash to shareholders. In the second half of 2025, Maple Leaf Foods will spin off its pork business into a new public company, Canada Packers. After the spinoff, we expect a substantial share repurchase program, which should support the stock price.

Buy, Sell, or Hold?

Beyond these operational improvements, there are strong reasons to remain invested in the stock. Consumers are moving from beef to other proteins due to price, health, and environmental considerations. The ‘Buy Canada’ movement has also boosted sales. After three strong quarters and favorable stock price reactions, we expect management to continue driving success in the quarters ahead.

-written by Jeff Pollock