Over the last six months, Vital Farms’s shares have sunk to $38, producing a disappointing 11.9% loss - a stark contrast to the S&P 500’s 5.2% gain. This might have investors contemplating their next move.

Following the drawdown, is this a buying opportunity for VITL? Find out in our full research report, it’s free.

Why Is VITL a Good Business?

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

1. Elevated Demand Drives Higher Sales Volumes

Revenue growth can be broken down into changes in price and volume (the number of units sold). While both are important, volume is the lifeblood of a successful staples business as there’s a ceiling to what consumers will pay for everyday goods; they can always trade down to non-branded products if the branded versions are too expensive.

Vital Farms’s average quarterly volume growth of 17.8% over the last two years has beaten the competition by a long shot. This is great because companies with significant volume growth are needles in a haystack in the stable consumer staples sector.

2. Projected Revenue Growth Is Remarkable

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, though some deceleration is natural as businesses become larger.

Over the next 12 months, sell-side analysts expect Vital Farms’s revenue to rise by 26.7%. While this projection is below its 30.5% annualized growth rate for the past three years, it is eye-popping and implies the market is baking in success for its products.

3. Outstanding Long-Term EPS Growth

Analyzing the change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.

Vital Farms’s full-year EPS flipped from negative to positive over the last three years. This is a good sign and shows it’s at an inflection point.

Final Judgment

These are just a few reasons why Vital Farms ranks highly on our list. After the recent drawdown, the stock trades at 27.5× forward P/E (or $38 per share). Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.

Stocks We Like Even More Than Vital Farms

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