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Understanding Mission Produce’s Newly Added Risk Factors
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Understanding Mission Produce’s Newly Added Risk Factors

California-based Mission Produce (AVO) is a farm products company that has primarily sold fresh avocados since 1983. In 2021, the company expanded into the fresh mango business as well. It sells its products to retail, wholesale, and foodservice customers worldwide.

Mission Produce’s earnings report shows revenue increased 15% year-over-year to $237 million in Fiscal Q4 2021 ended October 31. It posted adjusted EPS of $0.24, which dropped from $0.34 in the same quarter last year and missed the consensus estimate of $0.30. The company ended the quarter with $84.5 million in cash and $155 million in long-term debt.

Mission Produce CEO Steve Barnard said the business struggled with significant headwinds that adversely impacted profitability. The executive cited logistics challenges and changing consumer shopping patterns influenced by the evolving COVID-19 situation.

With this in mind, we used TipRanks to take a look at the newly added risk factors for Mission Produce.

Risk Factors

According to the new TipRanks Risk Factors tool, Mission Produce’s main risk category is Finance and Corporate, representing 28% of the total 39 risks identified for the stock. Production and Macro and Political are the next two major risk categories, each accounting for 18% of the total risks. Mission Produce has recently updated its profile with two new risk factors.

Mission Produce has entered into some credit agreements. It informs investors that those agreements come with restrictive terms that could cause problems down the road. For example, it mentions that its credit facility contains terms that limit its ability to borrow more funds, make investments, distribute dividends, or engage in mergers and acquisitions. Further, those terms require the company to maintain a certain leverage ratio.

The company cautions that if economic conditions deteriorate and its business declines, it may be unable to comply with the terms of its credit agreements. As a result, the lenders could demand immediate repayments of their loans. In that case, Mission Produce would need to seek financing from other sources to pay off the debts and fund its operations. The problem is that alternative financing may not be available on favorable terms. Mission Produce warns that if it cannot pay off the debts, lenders could seize the assets used to secure the loans.

The company tells investors that various legal issues arise in the ordinary course of its business. It mentions labor disputes, regulatory probes, and disputes with business partners and clients. The company warns that such legal issues could divert management’s attention, result in significant monetary penalties, damage its reputation, and cause its stock price to decline.

The Finance and Corporate risk factor’s sector average is 35%, compared to Mission Produce’s 28%. Mission Produce stock has gained about 5% year-to-date.

Analysts’ Take 

Following Mission Produce’s Q4 report, Bank of America Securities analyst Bryan Spillane maintained a Buy rating on Mission Produce stock but lowered the price target to $22 from $23. Spillane’s new price target suggests 39.06% upside potential.

Consensus among analysts is a Moderate Buy based on 2 Buys and 2 Holds. The average Mission Produce price target of $20 implies 26.42% upside potential to current levels.

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