MAMAMAMA

What You Need To Know About MAMA

Mama’s Creations (MAMA), formerly MamaMancini’s, are a US foods distributor based out of New Jersey. They describe themselves as a deli solutions company, serving fine Italian foods throughout the country.

MAMA are still a high-growth company. Their share price has been notably volatile over the past 6 months, but many spectators have applauded the company’s efforts.

At first, I thought Mama’s Creations was a top-notch pick. Here are three reasons why.

Bull Case 1: MAMA’s Branding

We’ve all heard the phrase, “There’s nothing like Grandma’s cooking”. Well, MAMA built a brand around it. It’s a great concept, since so many of us have memories of our grandparents’ home recipes. Nostalgic advertising 101.

There is evidence that MAMA’s efforts have been impactful. Ten years ago, Mama’s Creation’s sales stood at $9.3 million. Between January 2022 and 2023, MAMA racked up $93.2 million in revenue. This year they are well on track to beat that figure – crossing the 100m threshold.

A clear indication of brand power, right? Well, that’s not the whole story. So much of MAMA’s increased revenue has come from three major acquisitions: including Joseph Epstein Food Enterprises (2017), T&L Creative Salads (2021) and Olive Branch (2021).

There are clear positives here, beyond the obvious growth. Without question, these new product lines can be integrated into MAMA’s superior branding. But it is a mistake to think advertising has been the single cause of increased revenue. That’s why it’s always important to dive a little deeper than just the financial statements.

Bull Case 2: Primed For Growth

Revenue by itself is a fairly useless metric by which to assess a company. Profits are far more telling.

For Mama’s Creations, their ten-year profit story is far less attractive than that of revenue. That said, MAMA’s is in its infancy, still learning how to walk. We must therefore ask ourselves: are they at least moving in the right direction?

For 5 out of the past six years, MAMA has turned a profit – however slight. This year, they are on track to hit all-time highs: $3.6 million as of TTM. Yet this is lower than once might expect, until you remember the fact that MAMA has made several major acquisitions in recent years.

With this in mind, analysts seem divided on whether profits should be viewed as a win or a loss.

What is even less clear is a fair valuation for MAMA. Acquisitions notoriously throw everything out of balance. Simply Wall Street places a DCF calculation at $11 per share. Far too high, in my view, but considering the price is currently $3.50, it seems we are still looking at a bargain.  

That said, Mama’s Creations P/E is at 35.5, well higher than the industry average 16.2.

Bull Case 3: A Growing Market

The chilled and deli foods market is forecast to grow at an annual rate of 5.9%, according to a study by Grand View Research. MAMA are in prime position to take advantage. Their acquisitions alone show they are ready to meet new demand, so we can reasonably expect the share price to rise over the coming years.

The Bear Case For MAMA

It should be understood that lack of analysts’ coverage on any company is not necessarily a bad thing. In fact, there are times where it’s a major plus, especially if you find a gem yet to be discovered by Wall Street. This allows you to take full advantage of potential growth, where serious money can be made.

That said, lack of speculation has its downsides.

When I first looked at Mama’s Creations, I was sure I’d found a diamond the size of my fist. The few analysts who cover the company would certainly make you feel that way. As would a haphazard view of their financials.  Upon closer inspection, however, impurities do emerge.

One major blemish is the fact that MAMA relies so heavily on only a select number of clients. In January’s annual report, they reported that a mere 3 businesses were responsible for 58% of total revenue. No matter how strong these links are, nothing is guaranteed, and it should be noted that this does present a major risk for anyone looking to buy shares in MAMA.

Conclusion

There is undoubtably upside potential for Mama’s Creations. The company is growing fast, having made important acquisitions in the past 3 years alone. Revenue growth is especially good – and profits seem to be moving in the right direction. Moreover, it seems likely the deli solutions company will thrive as demand increases for its products, thanks largely to strong branding.

It should be noted, however, there are important risks. Overreliance on only 3 clients being one of the most important, as well as a valuation that’s difficult to pin down.

The case of MAMA reminds me that investing is a challenge. Things are not always clear, especially when you find a company with so little coverage.

 Still, the bulls have convinced me. I think it’s inevitable MAMA’s share price will rise, and I intend to add the company to my portfolio in the coming weeks.

Here is another one of my top stock picks.