SunOpta (STKL)

Plant-based food and beverage company SunOpta (NASDAQ:STKL) announced better-than-expected revenue in Q3 CY2025, with sales up 16.6% year on year to $205.4 million. The company’s full-year revenue guidance of $872.5 million at the midpoint came in 7.9% above analysts’ estimates. Its non-GAAP profit of $0.05 per share was $0.02 above analysts’ consensus estimates.

Company Overview

Committed to clean-label foods, SunOpta (NASDAQ:STKL) is a sustainability-focused food and beverage company specializing in the sourcing, processing, and packaging of organic products.

As America industrialized and moved away from an agricultural economy, people faced more demands on their time. Packaged foods emerged as a solution offering convenience to the evolving American family, whether it be canned goods or snacks. Today, Americans seek brands that are high in quality, reliable, and reasonably priced. Furthermore, there's a growing emphasis on health-conscious and sustainable food options. Packaged food stocks are considered resilient investments. People always need to eat, so these companies can enjoy consistent demand as long as they stay on top of changing consumer preferences. The industry spans from multinational corporations to smaller specialized firms and is subject to food safety and labeling regulations.

Competitors include private companies Organic Valley and Nature’s Path along with public companies Oatly (NASDAQ:OTLY), Conagra (NYSE:CAG), and General Mills (NYSE:GIS).

A company’s long-term performance is an indicator of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years.

With $792.4 million in revenue over the past 12 months, SunOpta 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, SunOpta’s revenue declined by 1.6% per year over the last three years despite consumers buying more of its products. We’ll explore what this means in the "Volume Growth" section.

This quarter, SunOpta reported year-on-year revenue growth of 16.6%, and its $205.4 million of revenue exceeded Wall Street’s estimates by 5.2%.

Looking ahead, sell-side analysts expect revenue to grow 8.1% over the next 12 months, an acceleration versus the last three years. This projection is commendable and suggests its newer products will spur better top-line performance.

All else equal, we prefer higher gross margins because they make it easier to generate more operating profits and indicate that a company commands pricing power by offering more differentiated products.

SunOpta 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 15.1% gross margin over the last two years. Said differently, for every $100 in revenue, a chunky $84.89 went towards paying for raw materials, production of goods, transportation, and distribution.

This quarter, SunOpta’s gross profit margin was 12.4%, marking a 4.6 percentage point decrease from 17% in the same quarter last year. SunOpta’s full-year margin has also been trending down over the past 12 months, decreasing by 1.9 percentage points. If this move continues, it could suggest a more competitive environment with some pressure to lower prices and higher input costs (such as raw materials and manufacturing expenses).

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

SunOpta was profitable over the last two years but held back by its large cost base. Its average operating margin of 3.2% was weak for a consumer staples business. This result isn’t too surprising given its low gross margin as a starting point.

On the plus side, SunOpta’s operating margin rose by 1.4 percentage points over the last year.

This quarter, SunOpta generated an operating margin profit margin of 3.3%, up 2.5 percentage points year on year. The increase was encouraging, and because its gross margin actually decreased, we can assume it was more efficient because its operating expenses like marketing, and administrative overhead grew slower than its revenue.

Revenue trends explain a company’s historical growth, but the 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.

In Q3, SunOpta reported adjusted EPS of $0.05, up from $0.02 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects SunOpta’s full-year EPS of $0.19 to grow 43%.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

SunOpta has shown weak cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 1.9%, subpar for a consumer staples business.

Taking a step back, an encouraging sign is that SunOpta’s margin expanded by 6.3 percentage points over the last year. The company’s improvement shows it’s heading in the right direction, and we can see it became a less capital-intensive business because its free cash flow profitability rose more than its operating profitability.

SunOpta’s free cash flow clocked in at $12.06 million in Q3, equivalent to a 5.9% margin. This cash profitability was in line with the comparable period last year and above its two-year average.

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).

SunOpta historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 2.1%, lower than the typical cost of capital (how much it costs to raise money) for consumer staples companies.

SunOpta reported $10.45 million of cash and $391.2 million of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $94.8 million of EBITDA over the last 12 months, we view SunOpta’s 4.0× net-debt-to-EBITDA ratio as safe. We also see its $10.67 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was good to see SunOpta beat analysts’ EPS expectations this quarter. We were also glad its full-year revenue guidance trumped Wall Street’s estimates. On the other hand, its gross margin missed. Zooming out, we think this quarter featured some important positives. The stock remained flat at $5.22 immediately following the results.

Updated: December 4, 2025 at 9:47 PM EST

Before deciding whether to buy SunOpta or pass, we urge investors to consider business quality, valuation, and the latest quarterly results.

We cheer for all companies serving everyday consumers, but in the case of SunOpta, we’ll be cheering from the sidelines. First off, its revenue has declined over the last three years. And while its volume growth has been in a league of its own, the downside is its projected EPS for the next year is lacking. On top of that, its gross margins make it more challenging to reach positive operating profits compared to other consumer staples businesses.

SunOpta’s P/E ratio based on the next 12 months is 26x. At this valuation, there’s a lot of good news priced in - you can find more timely opportunities elsewhere.

Wall Street analysts have a consensus one-year price target of $8 on the company (compared to the current share price of $3.77).

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.