Calavo (CVGW)

Fresh produce company Calavo Growers (NASDAQ:CVGW) missed Wall Street’s revenue expectations in Q3 CY2025, with sales falling 26.6% year on year to $124.7 million. Its non-GAAP profit of $0.25 per share was 32.4% below analysts’ consensus estimates.

Company Overview

A trailblazer in the avocado industry, Calavo Growers (NASDAQ:CVGW) is a pioneering California-based provider of high-quality avocados and other fresh food products.

The perishable food industry is diverse, encompassing large-scale producers and distributors to specialty and artisanal brands. These companies sell produce, dairy products, meats, and baked goods and have become integral to serving modern American consumers who prioritize freshness, quality, and nutritional value. Investing in perishable food stocks presents both opportunities and challenges. While the perishable nature of products can introduce risks related to supply chain management and shelf life, it also creates a constant demand driven by the necessity for fresh food. Companies that can efficiently manage inventory, distribution, and quality control are well-positioned to thrive in this competitive market. Navigating the perishable food industry requires adherence to strict food safety standards, regulations, and labeling requirements.

Competitors in the fresh produce category include Dole (NYSE:DOLE), Fresh Del Monte (NYSE:FDP), and Mission Produce (NASDAQ:AVO) along with private companies Chiquita Brands International and Sunkist Growers.

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years.

With $648.4 million in revenue over the past 12 months, Calavo is a small consumer staples company, which sometimes brings disadvantages compared to larger competitors benefiting from economies of scale and negotiating leverage with retailers.

As you can see below, Calavo’s revenue declined by 18.3% per year over the last three years, a rough starting point for our analysis.

This quarter, Calavo missed Wall Street’s estimates and reported a rather uninspiring 26.6% year-on-year revenue decline, generating $124.7 million of revenue.

Looking ahead, sell-side analysts expect revenue to grow 14.7% over the next 12 months, an acceleration versus the last three years. This projection is healthy and suggests its newer products will spur better top-line performance.

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.

Calavo 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 10% gross margin over the last two years. Said differently, for every $100 in revenue, a chunky $89.97 went towards paying for raw materials, production of goods, transportation, and distribution.

This quarter, Calavo’s gross profit margin was 9.3%, in line with the same quarter last year. On a wider time horizon, the company’s full-year margin has remained steady over the past four quarters, suggesting its input costs (such as raw materials and manufacturing expenses) have been stable and it isn’t under pressure to lower prices.

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

Calavo’s operating margin might fluctuated slightly over the last 12 months but has remained more or less the same, averaging 2.8% over the last two years. This profitability was paltry for a consumer staples business and caused by its suboptimal cost structureand low gross margin.

Analyzing the trend in its profitability, Calavo’s operating margin might fluctuated slightly but has generally stayed the same over the last year, meaning it will take a fundamental shift in the business model to change.

This quarter, Calavo generated an operating margin profit margin of negative 1.4%, down 3.2 percentage points year on year. Since Calavo’s operating margin decreased more than its gross margin, we can assume it was less efficient because expenses such as marketing, and administrative overhead increased.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Calavo’s EPS grew at an astounding 45.8% compounded annual growth rate over the last three years, higher than its 18.3% annualized revenue declines. However, we take this with a grain of salt because its operating margin didn’t improve and it didn’t repurchase its shares, meaning the delta came from reduced interest expenses or taxes.

In Q3, Calavo reported adjusted EPS of $0.25, up from $0.05 in the same quarter last year. Despite growing year on year, this print missed analysts’ estimates, but we care more about long-term adjusted EPS growth than short-term movements. Over the next 12 months, Wall Street expects Calavo’s full-year EPS of $1.55 to grow 17.4%.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

Calavo has shown mediocre cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 3.3%, subpar for a consumer staples business.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Calavo historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 3.9%, lower than the typical cost of capital (how much it costs to raise money) for consumer staples companies.

We struggled to find many positives in these results. Its revenue missed and its EBITDA fell short of Wall Street’s estimates. Overall, this was a softer quarter. The stock traded up 13.4% to $25.58 immediately following the results.

Updated: January 14, 2026 at 9:42 PM EST

We think that the latest earnings result is only one piece of the bigger puzzle. If you’re deciding whether to own Calavo, you should also grasp the company’s longer-term business quality and valuation.

Calavo isn’t a terrible business, but it isn’t one of our picks. To kick things off, its revenue has declined over the last three years. And while its EPS growth over the last three years has been fantastic, the downside is its gross margins make it more challenging to reach positive operating profits compared to other consumer staples businesses. On top of that, its brand caters to a niche market.

Calavo’s P/E ratio based on the next 12 months is 12.2x. This valuation multiple is fair, but we don’t have much faith in the company. We're fairly confident there are better stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $32.50 on the company (compared to the current share price of $25.33).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.