The Freedom Foods Group Ltd (ASX: FNP) share price has been a strong performer over the last couple of months.
Since the release of its full year results in August, the diversified food company's shares have rallied 36% higher.
The good news is that one leading broker believes that its shares can still climb higher from here.
Which broker is bullish on Freedom Foods?
According to a note out of Goldman Sachs, it has retained its conviction buy rating and $6.80 price target. This implies potential upside of almost 24% for its shares over the next 12 months.
The broker remains bullish on the company's prospects following a site tour of its Plant Based Beverage operations in New South Wales earlier this week.
Goldman appears to have liked what it saw and is confident this key division can grow strongly in the future.
Especially with the emergence of flexitarian diets. This is where consumers are happy to flex between dairy and non-dairy milk. Goldman believes this trend will continue to strengthen in the future and drive solid earnings growth.
It said: "We forecast a 24% divisional EBITDA CAGR from FY19 to FY22E. We expect plant based beverages to continue to gain share over traditional dairy in FNP's key markets. FNP is more exposed to Almond milk, with only a relatively small exposure to Soy milk. We see Almond continuing to gain share over Soy and traditional dairy in Australia, South East Asia and the US."
That could also be good news for Select Harvests Limited (ASX: SHV). It is one of the largest almond producers in the world.
Goldman also believes the company is "well-placed to capture consumer demand for emerging, early sat and future plant-based beverages such as: oat, coconut, cashew, pea and hemp."
Overall, combined with its Dairy Nutritionals Division, Goldman expects Freedom Foods to grow its revenue and earnings at an explosive rate over the coming years.
In FY 2020 it has forecast revenue growth of 34% to $636.9 million and earnings per share growth of 100% to 18 cents. After which, it expects earnings per share to grow to 28 cents in FY 2021 and 37 cents in FY 2022.
Should you invest?
I agree with Goldman Sachs on Freedom Foods and believe it is perfectly positioned for long term growth.
