Flowers Foods’s stock price has taken a beating over the past six months, shedding 37.3% of its value and falling to $10.66 per share. This was partly driven by its softer quarterly results and might have investors contemplating their next move.
Is now the time to buy Flowers Foods, or should you be careful about including it in your portfolio? Get the full stock story straight from our expert analysts, it’s free for active Edge members.
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 you should be careful with FLO 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. Projected Revenue Growth Is Slim
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 rise by 2.9%, close to This projection is underwhelming and suggests its newer products will not catalyze better top-line performance yet.
3. EPS Trending Down
We track the change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Sadly for Flowers Foods, its EPS declined by 20.6% annually over the last three years while its revenue grew by 2.9%. This tells us the company became less profitable on a per-share basis as it expanded.
Final Judgment
Flowers Foods falls short of our quality standards. After the recent drawdown, the stock trades at 10.6× forward P/E (or $10.66 per share). This valuation is reasonable, but the company’s shaky fundamentals present too much downside risk. There are better investments elsewhere. We’d recommend looking at our favorite semiconductor picks and shovels play.
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