Summary
J&J's multiples continue to look inflated - despite negative EBIT growth through the first three quarters of FY18.
A hugely disappointing Q3 led to a sell-off - which already is reversing.
JJSF looks like it could be a short, but it's looked that way for some time now, and investors keep bidding the stock back up.
I've been a skeptic when it comes to J&J Snack Foods (JJSF) for some time now. Not much has changed after the first three quarters of the company's fiscal 2018 (ending September). I like J&J as a company - and perhaps even more so now, after strong top-line results YTD and more detail on what's been a highly successful M&A strategy. The issue long has been valuation, however - and that's a seemingly bigger problem amid significant margin pressure in Q2 and Q3.
As it's been for a while now, the question seems to be whether JJSF is worth shorting, and as it's been for a while now, the answer still seems to be not quite. Clearly, investors have a great deal of confidence in the company and the stock (though I've argued in the past that index fund buying may explain some of the support here; that correlation has weakened sharply in the past few quarters, however). A sell-off after a very concerning Q3 report on July 30 already is reversing.
