Calavo currently trades at $28.09 per share and has shown little upside over the past six months, posting a middling return of 1.1%.
Is there a buying opportunity in Calavo, or does it present a risk to your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.
Why Is Calavo Not Exciting?
We're sitting this one out for now. Here are three reasons why CVGW doesn't excite us and a stock we'd rather own.
1. Revenue Spiraling Downwards
Examining a company’s long-term performance can provide clues about its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Calavo struggled to consistently generate demand over the last three years as its sales dropped at a 14.7% annual rate. This was below our standards and is a sign of lacking business quality. 
2. Fewer Distribution Channels Limit its Ceiling
With $688.3 million in revenue over the past 12 months, Calavo is a small consumer staples company, which sometimes brings disadvantages compared to larger competitors benefiting from economies of scale and negotiating leverage with retailers.
3. Low Gross Margin Reveals Weak Structural Profitability
All else equal, we prefer higher gross margins because they usually indicate that a company sells more differentiated products, has a stronger brand, and commands pricing power.
Calavo has bad unit economics for a consumer staples company, signaling it operates in a competitive market and lacks pricing power because its products can be substituted. As you can see below, it averaged a 10.6% gross margin over the last two years. That means Calavo paid its suppliers a lot of money ($89.42 for every $100 in revenue) to run its business. 
Final Judgment
Calavo isn’t a terrible business, but it doesn’t pass our quality test. That said, the stock currently trades at 16.2× forward P/E (or $28.09 per share). Beauty is in the eye of the beholder, but we don’t really see a big opportunity at the moment. We're pretty confident there are superior stocks to buy right now. Let us point you toward the most dominant software business in the world.
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