Leroy Seafood – Norwegian share with huge growth potential

The world population is growing and the standard of living is increasing. In this regard, the shares of the company in the food sector can benefit greatly from this growing trend.

The world population is growing and living standards are increasing globally. The expectation is that around 9.7 billion people will walk around this earth by 2050. This is obviously an explosive increase, knowing that there were still 2.5 billion people in 1950 and only 6.1 billion in 2000.

If the consumption per person remains the same, this will lead to an expected growth rate of 40% in need of protein rich foods. This is especially true of meat and fish. But consumption per person is not expected to remain the same at all, it will also increase.

The standard of living is also increasing strongly. The standard in western markets increases and people in emerging markets also live more and more luxuriously. The number of millionaires grows explosively and is higher than ever before. An important fact in this statistic is that the amount of food does not grow as hard as the need. Supply and demand will therefore be in off-balance and opportunities will arise.

Salmon industry

For the period 2010-2030, estimates have been made that fish production will increase by 24%. This increase is necessary to meet the demands of the growing world population. When we express this 24% growth in hard numbers, this amounts to 23 million tonnes of extra fish. Of course, we are not talking about a physical product. Producing more fish is not just a matter of producing more fish, fish must be caught.

Salmon is one of the most healthy types of fish and although the product is relatively expensive in the supermarket, the cost of catching fish has fallen sharply. Salmon is one of the most “industrialized” fish species existing today. Since 1990 there has been a growth in production of no less than 800%, which has caused efficiency to increase. This means that the margins for salmon are very beneficial to the exploiters.

Most salmon comes from Norway, Chile, Scotland and Canada, where a combination of water temperature and currents is optimal for salmon. Of the global demand for fish, salmon now accounts for only a small percentage of 4.3%. If the trend of more demand for luxury items of recent years is to continue, the salmon industry might hit the jackpot. For us a reason to look for potential companies in this sector.

This share has a huge growth potential

The Norwegian company Leroy Seafood is very attractively valued at a price / earnings ratio of slightly above 9. If the forecasts are correct and the growth continues, the P/E ratio for next year will drop even below 9, a very cheap share indeed.

Meanwhile, the above growth in the sector is clearly visible as the fundamentals of Leroy Seafood are improving. Growth in sales this year is 16% and this double digit increase is also expected for the coming years. The main reason for buying this company is mainly because revenue growth will translate directly into profit for this company. Earnings per share will rise explosively, as hardly any costs have to be incurred.

We expect all this positive news to translate into a higher price. The main risks and threats lie in the fact that other players will take away more market share. Given the firm position and reputation of Leroy Seafood in the market, we see this as an acceptable risk at the moment.