Is Farmmi a Good Chinese Stock to Add to Your Portfolio?

: FAMI | Farmmi, Inc. News, Ratings, and Charts

FAMI – Chinese agricultural products supplier Farmmi (FAMI) has achieved decent growth in the booming mushroom industry as the global embrace of healthier lifestyles continues to push mushrooms into the dietary mainstream. However, because trade restrictions continue to be a cause for concern for agricultural exporters, will FAMI face obstacles in its growth path? Read more to find out.

Headquartered in Lishui, China, Farmmi, Inc. (FAMI) processes and sells agricultural products in China, the United States, and Japan, among other countries. The company’s expanded, state-of-the-art production and warehousing capabilities has significantly increased its customer engagement globally.

However, FAMI’s stock has suffered a 51% decline over the past month and 11.1% over the past year. Its recent, upsized  public offering of  140 million ordinary shares at $0.30 per share could be the primary reason behind the decline in stock price.

Although an increased worldwide demand for mushrooms should continue to help the company win multi-product sales orders, its weak profit margin, poor financials amid rising trade restrictions could cause the stock to see further pullbacks in the coming months.

Here is what we think could influence FAMI’s performance in the near term:

Strong Global Demand for Mushrooms

This month, FAMI’s subsidiary, Zhejiang Forest Food Co., Ltd. was awarded a multi-product export order  to Israel. The order was for the company’s Shiitake mushrooms and dried black fungus. It also recently won  a multi-product order for its superior quality dried mushrooms and dried black fungus for export to Japan. Underpinned by the continued growth in worldwide demand for mushrooms, FAMI’s high-quality mushrooms and edible fungi should see increased sales.

Diplomatic Tensions Can Affect Export

Growing geopolitical tensions have  resulted in many countries reducing their reliance on China for agricultural products. Although moves to reduce dependency on China could be a multi-year effort, a raft of trade measures restricting imports from the country could force agricultural exporters to abandon some of their biggest international markets.

As such, long-running trade disputes and diplomatic tensions could negatively impact FAMI’s export business.

Mixed Historical Growth

FAMI’s revenues and total assets have increased at CAGRs of 4.2% and 40.3%, respectively, over the past three years. However, its EBITDA and net income declined at CAGRs of 14.9% and 36.9%, respectively, over this period. The company’s EPS declined at a 46.5%  annualized rate over the past three years, while its EBIT declined at a 15.4% rate over this period.

Weak Profitability

The company’s 16.5% trailing-12-month gross profit margin is 53.8% lower than the 35.6% industry average. Also, its 7.1% EBITDA margin is 50.3% lower than the 14.4% industry average. Moreover, its trailing-12-month levered free cash flow margin is negative 18.1%. Its ROE and ROA of 3.3% and 2.2%, respectively, are significantly lower than the 11.6% and 5.3% industry averages.

POWR Ratings Reflect Uncertain Prospects

FAMI has an overall C rating, which translates to Neutral in our POWR Ratings system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree. 

Our proprietary rating system also evaluates each stock based on eight different categories. FAMI has a C grade for Growth and Momentum. The company’s mixed growth history justifies the Growth grade. Also, its negative price returns over the past year is in sync with the Momentum grade.

Also, it has an F grade for Quality, which is consistent with the stock’s weak profitability.

In addition to the grades we’ve highlighted, one can check out additional FAMI ratings for Sentiment, Value and Stability here

FAMI is ranked #19 of 30 stocks in the C-rated Agriculture industry. Click here to view the top-rated stocks in the Agriculture industry.

Bottom Line

The increasing popularity of mushrooms in restaurants, households and wellness centers is driving the demand for FAMI’s high-quality products. However, growing trade restrictions and diplomatic tensions could put pressure on the Chinese company’s exports. Furthermore,  its weak profit margin could cause the stock to retreat  further in the near term. Thus, we think investors should wait for better entry points before investing in the stock.


FAMI shares rose $0.02 (+5.09%) in premarket trading Friday. Year-to-date, FAMI has declined -62.50%, versus a 11.44% rise in the benchmark S&P 500 index during the same period.


About the Author: Imon Ghosh


Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization. More...


More Resources for the Stocks in this Article

TickerPOWR RatingIndustry RankRank in Industry
FAMIGet RatingGet RatingGet Rating

Most Popular Stories on StockNews.com


:  |  News, Ratings, and Charts

Bear Market Game Plan Revealed!

The bear market has been firmly in place all year long. Just some folks didn’t get the memo til 6/13 when the S&P 500 (SPY) finally broke below the 20% decline level at 3,855 to appreciate just how bad things had become. That is the past. We need to focus on the future like how low the stocks will go...and the best trades to stay on the right side of the market action. All that and more is in Steve Reitmeister “Bear Market Game Plan”. Read on below for more...

:  |  News, Ratings, and Charts

Insiders Are Making Big Buys In Carvana – Should You?

Used car retailer Carvana (CVNA) has seen significant insider buying recently, reflecting bullish sentiments. However, given its bleak bottom-line positioning, should you invest in the stock now? Read on to find out...

:  |  News, Ratings, and Charts

Investors: Please AVOID Cash During This Bear Market

When most people hear the sirens of the bear market they run for cover in cash. But is that the smartest idea when inflation is over 8% and your cash accounts still pay virtually nothing? (That was a rhetorical question). Gladly there is a better way to carve out profits as the stock market (SPY) heads lower and lower. 40 year investment veteran Steve Reitmeister shares that with you and more in his newest commentary below…

:  |  News, Ratings, and Charts

3 Top-Rated High-Dividend Stocks Under $20

The Fed’s aggressive interest rate hikes in the face of the rising inflation are raising the possibility of the economy tipping into a recession. Given the market uncertainties, high-dividend stocks Sisecam Resources (SIRE), Grindrod Shipping (GRIN), and Alliance Resource (ARLP), which are currently trading under $20, could be an ideal investment to ensure a stable income stream. These stocks are rated Strong Buy or Buy in our proprietary rating system. Keep reading…

:  |  News, Ratings, and Charts

Investors: Please AVOID Cash During This Bear Market

When most people hear the sirens of the bear market they run for cover in cash. But is that the smartest idea when inflation is over 8% and your cash accounts still pay virtually nothing? (That was a rhetorical question). Gladly there is a better way to carve out profits as the stock market (SPY) heads lower and lower. 40 year investment veteran Steve Reitmeister shares that with you and more in his newest commentary below…

Read More Stories

More Farmmi, Inc. (FAMI) News View All

Event/Date Symbol News Detail Start Price End Price Change POWR Rating
Loading, please wait...
View All FAMI News