Since June 2024, Lancaster Colony has been in a holding pattern, posting a small loss of 4.3% while floating around $178.60. The stock also fell short of the S&P 500’s 10.4% gain during that period.

Is there a buying opportunity in Lancaster Colony, or does it present a risk to your portfolio? Get the full breakdown from our expert analysts, it’s free.

We're swiping left on Lancaster Colony for now. Here are two reasons why there are better opportunities than LANC and a stock we'd rather own.

Why Is Lancaster Colony Not Exciting?

Known for its frozen garlic bread and Parkerhouse rolls, Lancaster Colony (NASDAQ:LANC) sells bread, dressing, and dips to the retail and food service channels.

1. Less Negotiating Power with Suppliers

Lancaster Colony is a small consumer staples company, which sometimes brings disadvantages compared to larger competitors benefiting from economies of scale and negotiating leverage. On the other hand, it can grow faster because it’s working from a smaller revenue base and has a longer runway of untapped store chains to sell into.

2. 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.

Lancaster Colony has bad unit economics for a consumer staples company, signaling it operates in a competitive market and lacks pricing power because its products can be substituted. As you can see below, it averaged a 22.4% gross margin over the last two years. That means Lancaster Colony paid its suppliers a lot of money ($77.64 for every $100 in revenue) to run its business.

Final Judgment

Lancaster Colony’s business quality ultimately falls short of our standards. With its shares underperforming the market lately, the stock trades at 26.1× forward price-to-earnings (or $178.60 per share). This valuation tells us a lot of optimism is priced in - we think there are better investment opportunities out there. We’d recommend looking at Cloudflare, one of our top software picks that could be a home run with edge computing.

Stocks We Like More Than Lancaster Colony

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