Should Costa Group be in your ASX 200 share portfolio?

The Costa Group Holdings Ltd (ASX: CGC) share price has dropped 2.47% on the ASX this afternoon. Should you buy?

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Costa Group Holdings Ltd (ASX: CGC) share price has dropped 2.47% on the ASX this afternoon, to trade 13 cents lower at $5.14.

Costa Group describes itself as "Australia's leading grower, packer and marketer of premium quality fresh fruit and vegetables." The company sells mushrooms, berries, tomatoes, avocados, grapes, bananas and citrus fruit from its own farms, as well as a group of strategic alliance partners. These partners allow Costa to provide fresh produce in Australia, Asia, North America and Europe throughout the year.

Growth forecast upgraded on 1H FY19 results

Costa is a growth company that has traditionally traded on a multiple which reflects that. The Costa share price is down 41% from its all-time high, after announcing on 10 January 2019 that it expected flat profit growth in FY19. The halt to profit growth was unexpected and brought about by weaker demand for its berries and avocados, alongside some delays in upgrading a mushroom facility.

On 27 February 2019, the company released its half-year results, which were better than the market expected. Costa Group's share price was up 4.4% on the day, from a 2.4% decline in revenue and a 42% decline in EBITDA before SGARA, material items, and amortisation. Fortunately, management said that: "during February solid price recovery has been experienced across our categories from the earlier challenging period." For the calendar year to 31 December 2019, management now expects profit growth of at least 30%.

Costa has grown both organically and through acquisitions. The company most recently acquired berry producer African Blue and used some debt to do so. Net debt currently sits at $244.6 million. Investors should not only pay attention to the amount of debt that the company has on the balance sheet but also the serviceability of that debt. Costa paid $4.2 million in interest expenses, for the half to 31 December 2018. This is compared to $3 million in the prior corresponding period. Interest rates are not expected to rise rapidly in the near term.

Costa shares go ex-dividend on 13 March, with the company paying a 5 cent fully franked interim dividend. This dividend brings the company's yield to 2.56%, or 3.66% grossed up.

Foolish takeaway

There is no doubt that the average person is more health conscious than they were 20 years ago. Costa has a number of recipes on its website, but I think healthiest thing for you to do is buy some shares in the company. Over the long term, I expect Costa Group's current share price and forward P/E ratio of 21x to represent a respectable entry point.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for over ten years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the 'five best ASX stocks' for investors to buy right now. We believe these stocks are trading at attractive prices and Scott thinks they could be great buys right now...

See The 5 Stocks *Returns as of 30 April 2025

Motley Fool contributor Proutlb95 has no position in any of the stocks mentioned and expresses his own opinions. The Motley Fool Australia owns shares of and has recommended COSTA GRP FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

A young man pointing up looking amazed, indicating a surging share price movement for an ASX company
Broker Notes

3 amazing ASX 200 shares to buy and hold forever

Brokers think these shares are in the buy zone. Let's see why they could be top buy and hold picks.

Read more »

iPhone with the logo and the word Google spelt multiple times in the background.
Opinions

I've been buying these 2 US stocks in 2025. Here's why

Sometimes the US markets are a better place to go shopping for stocks.

Read more »

Ecstatic woman looking at her phone outside with her fist pumped.
Share Gainers

Why Catapult, Hutchinson, SKS, and West African shares are pushing higher today

These shares are having a strong session despite the market weakness.

Read more »

A man sits in despair at his computer with his hands either side of his head, staring into the screen with a pained and anguished look on his face, in a home office setting.
Share Fallers

Why Dexus, Mayne Pharma, Nufarm, and Treasury Wine shares are falling today

These shares are having a tough session on Thursday. But why?

Read more »

A woman sits at her computer with her chin resting on her hand as she contemplates her next potential investment.
Mergers & Acquisitions

IAG share price lifts off on strategic alliance approval

IAG shares are racing higher in Thursday’s sinking market.

Read more »

Rising gold share price represented by a green arrow on piles of gold block.
Gold

Up 72% in 2025, why is this ASX 200 gold stock racing ahead of the benchmark again today?

Investors are bidding up this high-flying ASX 200 gold stock again on Thursday. But why?

Read more »

A woman wearing a black and white striped t-shirt looks to the sky with her hand to her chin contemplating buying ASX shares today as the market rebounds
Share Market News

Where could the RBA interest rate go in the next 12 months?

Here’s what one expert thinks could happen with interest rates by early 2026.

Read more »

A man holds his head in his hands after seeing bad news on his laptop screen.
Share Market News

5 things to watch on the ASX 200 on Thursday

It looks set to be a tough session for Aussie investors today.

Read more »