Dole trades at $13.99 per share and has moved almost in lockstep with the market over the last six months. The stock has lost 6.9% while the S&P 500 is down 3.3%. This was partly driven by its softer quarterly results and may have investors wondering how to approach the situation.
Is now the time to buy Dole, or should you be careful about including it in your portfolio? See what our analysts have to say in our full research report, it’s free.
Why Do We Think Dole Will Underperform?
Despite the more favorable entry price, we're swiping left on Dole for now. Here are three reasons why DOLE doesn't excite us and a stock we'd rather own.
1. Revenue Spiraling Downwards
A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Dole’s demand was weak over the last three years as its sales fell at a 2% annual rate. This wasn’t a great result and signals it’s a low quality business. 
2. Projected Revenue Growth Is Slim
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.
Over the next 12 months, sell-side analysts expect Dole’s revenue to rise by 1.9%. While this projection suggests its newer products will catalyze better top-line performance, it is still below average for the sector.
3. 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.
Dole 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 8.4% gross margin over the last two years. That means Dole paid its suppliers a lot of money ($91.59 for every $100 in revenue) to run its business. 
Final Judgment
We see the value of companies helping consumers, but in the case of Dole, we’re out. Following the recent decline, the stock trades at 10.2× forward P/E (or $13.99 per share). This valuation multiple is fair, but we don’t have much confidence in the company. There are better stocks to buy right now. Let us point you toward one of our top digital advertising picks.
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