Over the past six months, The Marzetti Company’s shares (currently trading at $163.79) have posted a disappointing 8.2% loss, well below the S&P 500’s 7.6% gain. This was partly due to its softer quarterly results and may have investors wondering how to approach the situation.

Is there a buying opportunity in The Marzetti Company, or does it present a risk to your portfolio? See what our analysts have to say in our full research report, it’s free.

Why Is The Marzetti Company Not Exciting?

Even though the stock has become cheaper, we don't have much confidence in The Marzetti Company. Here are three reasons there are better opportunities than MZTI and a stock we'd rather own.

1. Long-Term Revenue Growth Disappoints

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Regrettably, The Marzetti Company’s sales grew at a sluggish 3% compounded annual growth rate over the last three years. This fell short of our benchmark for the consumer staples sector.

2. Projected Revenue Growth Is Slim

Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.

Over the next 12 months, sell-side analysts expect The Marzetti Company’s revenue to rise by 1.5%, close to This projection is underwhelming and implies its newer products will not accelerate its top-line performance yet.

3. Low Gross Margin Reveals Weak Structural Profitability

At StockStory, we prefer high gross margin businesses because they indicate pricing power or differentiated products, giving the company a chance to generate higher operating profits.

The Marzetti Company has bad unit economics for a consumer staples company, giving it less room to reinvest and develop new products. As you can see below, it averaged a 23.4% gross margin over the last two years. Said differently, for every $100 in revenue, a chunky $76.58 went towards paying for raw materials, production of goods, transportation, and distribution.

Final Judgment

The Marzetti Company isn’t a terrible business, but it doesn’t pass our bar. Following the recent decline, the stock trades at 22.3× forward P/E (or $163.79 per share). Investors with a higher risk tolerance might like the company, but we think the potential downside is too great. We're fairly confident there are better investments elsewhere. We’d suggest looking at a dominant Aerospace business that has perfected its M&A strategy.

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