I've done a lot of research in this stock. Farm Pride used to be...

I've done a lot of research in this stock. Farm Pride used to be diversified with other products WAY BACK, but sold off other divisions. That's why they are called Farm Pride Foods, as opposed to Farm Pride Eggs lol... the legacy lives on in their name. It seems to me like the directors really only understood the egg industry, and so they have returned to their core business. The company has treaded water for many years, with challenging industry conditions. The drought pushed up the cost of grains, one of the main costs for the egg industry. Then there was substantial debt. And I've also heard rumors of profit-shifting, but I'm not going to get into that, because right now I'm happy with the profit margins. Perhaps with the ACCC on its back, Farm Pride is playing everything by the book, and so if there was any profit shifting in the past, its certainly not going to risk any further legal action by the corporate regulator!!

Farm Pride does have a products division, that specializes in eggs. For instance, from what I remember they sell hard boiled eggs, so that busy mums and dads can put a boiled egg into their children's lunch box without having to spend the time making it. There probably is scope to branch out into other types of food product, but given the companies history, that's unlikely until they get their gearing level down into a more sustainable range.

Speaking of debt, this company has a solid track record of reducing its debt! Its unfortunate that they have stopped drawing attention to this important fact in their recent reports. The former managing director, Zelko Lendlich, would regularly provide bar charts in reports, showing the steady downward trend in debt levels. This trend has continued, although for some reason the new managing director isn't selling this well enough.

This company is ripe for further rises in its share price. Its been undervalued for years, principally because its been treading water--- paying off debt is great, but with no profit margin to show for it. No profit equals no dividend. No dividend equals no investor interest.

But now as profits are coming in for two half years in a row, the share price has risen considerably. And these profits are substantial, given the market capitalization. A $2 million profit in a half year, with a $17 million market capitalization is a substantial return.

These profit margins are extraordinary, and realistically speaking, they are probably not going to remain this high. Its a competitive industry.

However, at 30 cents a share, this company remains under valued. The reason the share price hasn't risen further on the back of these extraordinary profits (up over 4000% over the prior corresponding period!!) is the ACCC action in the Federal Court against the company.

In my estimation, Farm Pride will win this case. Perhaps not at the Federal Court level, but upon appeal to the High Court. The High Court is very lenient about corporate behavior. And the ACCC has a poor track record of winning these types of cases-- or any type of case for that matter!! The ACCC's function is principally to establish clarity in the market place about what types of behavior are lawful, and which are not. That means it has to take legal action from time to time. But that doesn't mean it has to win them. For instance, there was a case against Citibank for insider trading. In that case, Citibank did buy shares in a company that it knew would go up in value, but it defended itself on the basis that it had effective information barriers in place, so the traders buying the stock didn't know that it would go up. Another case was against Fortescue Metal Group, which released an announcement saying a deal had been finalized, even though it hadn't been. The High Court ruled this wasn't misleading, because everyone knows that in business you sometimes have to bluff. And now we come to the case against Farm Pride--- yes the former managing director expressed a view that there was an oversupply of eggs, but is the High Court going to penalize Farm Pride because its managing director exercised his right to free speech? No way! Not without evidence that there was an actual cartel-like agreement made-- which the ACCC isn't alleging!!

So the ACCC action will blow over. And then the share price will sky rocket-- even if profit margins fall down to more sustainable levels.

My research suggests this stock is ready for take off. Its extremely well managed. And I see the ACCC action as a positive, it ensures that Farm Pride plays everything by the book.

Unfortunately I am personally unable to invest any money in this stock at the moment, but I am encouraging everyone I know to do so, because it is a fantastic opportunity. Debt is a risk, but look at the interest rates-- they are at record lows!! And, like I said, debt has been steadily reduced over many years.