Vital Farms (VITL)

Egg and butter company Vital Farms (NASDAQ:VITL) beat Wall Street’s revenue expectations in Q3 CY2025, with sales up 37.2% year on year to $198.9 million. The company expects the full year’s revenue to be around $775 million, close to analysts’ estimates. Its GAAP profit of $0.36 per share was 20.9% above analysts’ consensus estimates.

Company Overview

With an emphasis on ethically produced products, Vital Farms (NASDAQ:VITL) specializes in pasture-raised eggs and butter.

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.

Cal-Maine Foods (NASDAQ:CALM) is a publicly-traded competitor and dominant player in the egg industry. Private competitors include Rose Acre Farms Hillandale Farms, but Cal-Maine’s scale and market share are unique.

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

With $711.9 million in revenue over the past 12 months, Vital Farms is a small consumer staples company, which sometimes brings disadvantages compared to larger competitors benefiting from economies of scale and negotiating leverage with retailers. On the bright side, it can grow faster because it has a longer list of untapped store chains to sell into.

As you can see below, Vital Farms grew its sales at an exceptional 29.3% compounded annual growth rate over the last three years as consumers bought more of its products.

This quarter, Vital Farms reported wonderful year-on-year revenue growth of 37.2%, and its $198.9 million of revenue exceeded Wall Street’s estimates by 3.7%.

Looking ahead, sell-side analysts expect revenue to grow 26.1% over the next 12 months, a deceleration versus the last three years. Still, this projection is commendable and indicates the market is forecasting success for its products.

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.

Vital Farms has good unit economics for a consumer staples company, giving it the opportunity to invest in areas such as marketing and talent to stay competitive. As you can see below, it averaged an impressive 37.6% gross margin over the last two years. That means for every $100 in revenue, $62.39 went towards paying for raw materials, production of goods, transportation, and distribution.

This quarter, Vital Farms’s gross profit margin was 37.7%, in line with the same quarter last year. Zooming out, the company’s full-year margin has remained steady over the past 12 months, 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.

Vital Farms’s operating margin might fluctuated slightly over the last 12 months but has generally stayed the same, averaging 10.8% over the last two years. This profitability was higher than the broader consumer staples sector, showing it did a decent job managing its expenses. This is seen in its fast historical revenue growth and healthy gross margin, which is why we look at all three data points together.

Looking at the trend in its profitability, Vital Farms’s operating margin might fluctuated slightly but has generally stayed the same over the last year. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

In Q3, Vital Farms generated an operating margin profit margin of 10.8%, up 4.4 percentage points year on year. The increase was encouraging, and because its operating margin rose more than its gross margin, we can infer it was more efficient with expenses such as marketing, and administrative overhead.

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, Vital Farms reported EPS of $0.36, up from $0.16 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 Vital Farms’s full-year EPS of $1.32 to grow 16.3%.

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.

Vital Farms 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 4%, subpar for a consumer staples business.

Taking a step back, we can see that Vital Farms’s margin dropped by 11.9 percentage points over the last year. If the trend continues, it could signal it’s in the middle of a big investment cycle.

Vital Farms burned through $10.61 million of cash in Q3, equivalent to a negative 5.3% margin. The company’s cash flow turned negative after being positive in the same quarter last year, which isn’t ideal considering its longer-term trend.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Vital Farms’s five-year average ROIC was 25.1%, beating other consumer staples companies by a wide margin. This illustrates its management team’s ability to invest in attractive growth opportunities and produce tangible results for shareholders.

Companies with more cash than debt have lower bankruptcy risk.

Vital Farms is a well-capitalized company with $145.1 million of cash and $56.28 million of debt on its balance sheet. This $88.77 million net cash position is 6.2% of its market cap and gives it the freedom to borrow money, return capital to shareholders, or invest in growth initiatives. Leverage is not an issue here.

We were impressed by how significantly Vital Farms blew past analysts’ EBITDA expectations this quarter. We were also glad its revenue outperformed Wall Street’s estimates. Looking ahead, full-year EBITDA guidance also came in ahead. Overall, we think this was a solid quarter with some key areas of upside. The stock traded up 6.1% to $34.08 immediately following the results.

Updated: December 3, 2025 at 9:50 PM EST

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

There is a lot to like about Vital Farms. First of all, the company’s revenue growth was exceptional over the last three years. And while its cash profitability fell over the last year, its volume growth has been in a league of its own. On top of that, Vital Farms’s EPS growth over the last three years has been fantastic.

Vital Farms’s P/E ratio based on the next 12 months is 19.3x. Looking at the consumer staples landscape today, Vital Farms’s fundamentals really stand out, and we like it at this price.

Wall Street analysts have a consensus one-year price target of $53.70 on the company (compared to the current share price of $30.52), implying they see 76% upside in buying Vital Farms in the short term.