The latest inflation metric, the personal consumption expenditure index, came in at 4.9% year-over-year, which was slightly higher than the expected 4.8%. This means inflation is alive and well, and investors typically do very well to hedge inflation with Food companies.
With this in mind, today we will be comparing two intriguing Food companies, Blue Star Foods Corp (BSFC) and AquaBounty Technologies (AQB), looking at their business models, growth opportunities, financials, and valuations. And by the end, we will show which of these two companies are providing investors the more favourable investment opportunity today.
AquaBounty, is a biotechnology company using innovative land-based farming technology and genetics to supply the world with high quality seafood in a sustainable away. They primarily focus on their AquaAdvantage Salmon, which is a bioengineered Atlantic salmon for human consumption. AquaBounty is seeking to use their land-based or Recirculating Aquaculture System (RAS) to create a more efficient and cost-effective way of harvesting salmon, selling this product to distributors and retailers.
Blue Star Foods, is although similar to AquaBounty, has some important differences. It is an integrated ESG seafood company that processes, packages and sells high-value seafood products. It sources sustainable premium crabmeat from Asia and also owns and operates the oldest continuously operating Recirculating Aquaculture System (RAS) full grow-out salmon farm in North America.
Their RAS division is Taste of BC (TBC) Aqua Farms, which is focused on producing salmon, and they recently launched a RAS division to harvest Atlantic Crab throughout the year, which means delivering it in the off-season as well.
Both companies are operating in the seafood industry, and with Blue Star’s most recent acquisition of TBC the two companies have become direct competitors. The key differentiator between Blue Star and AquaBounty lies in the portfolio of products and services they offer. Where AquaBounty’s operations are limited to indoor farming, BlueStar has a long history of sourcing top quality seafood products from various parts of Asia. Why is this seemingly subtle difference important? Blue Star, through their traditional operations has built strong relationships with some of the largest distributors and retailers in the world, including, Walmart, Costco, and Disney. This should allow the company to continue growing through regular operations, as well as begin to benefit from the favourable margins associated with land-based aquaculture farming.
Make no mistake, the largest avenue of growth for both companies is continuing to expand on their land-based RAS operations. The salmon industry is currently worth $17 billion, and through their recent acquisition of TBC Blue Star has opened the door to a sizeable market opportunity.
Blue Star, with their acquisition of Taste of BC, is building a 1,500 metric tonne salmon farm and their other recent acquisition of a Soft-Shell Crab company will begin to leverage their RAS resources and expertise to harvest soft shell crabs year-round. As it stands today, the harvest season for soft-shell crabs is extremely short, as the process of hard-shell crabs detaching their shell to build a soft shell happens for only a few months every year (soft shell crabs, because of the enzymes they release during the shedding of their hard shell, which is also known as molting, is some of the best tasting and most sought-after seafood product there is). And to effectively enable this molting process to take place indoors, Blue Star will leverage their proprietary Bio-Plan technology and processes, which will create the natural environment needed for these crabs to successfully produce the required enzymes and complete the molting process. Blue Star has already begun initial operations of the RAS soft shell crab project.
AquaBounty is also doubling down on their RAS farming operations. The company has over 200,000 sq ft in land-based farming space and is currently investing over $200 million into a new 479,000 sq ft facility in Pioneer, Ohio. They expect the new salmon farm to be operational sometime in 2023 and will be one of the largest plants in the world.
- BSFC is profitable on an operating basis, AQB is not.
- BSFC has $11M in revenue and AQB has $800K in revenue.
- BSFC is undervalued and trades at 6.6x sales revenue multiple and AQB trades at a 145x sales revenue multiple.
- BSFC releases their detailed production statistics in RAS, and AQB does not.
Financials & Valuations
|Market Cap||Price/Sales||Revenue (TTM)|
|Blue Star Foods Corp||$66.11 Million||6.99||$11.04 Million|
|AquaBounty Technologies||$110.80 Million||132.03||$807.36 Thousand|
Glancing at the chart above, Blue Star, although doing 10 times more in trailing twelve-month revenue than AquaBounty trades at only 7 times sales (compared to AquaBounty’s 132). And with being already profitable can facilitate further growth at scale. As well, Blue Star has yet to fully capitalize on their acquisition of TBC and should continue to see improved margins as their new RAS operating segment begins to account for more of their overall revenue.
The most likely reason for the discrepancy in valuation between these two companies comes from investors having high expectations of AquaBounty’s land-based RAS farming operations, and these same investors not realizing that Blue Star now has their own quickly growing RAS operating segment.
Both companies have great prospects for further growth from today, however, with the large difference in valuation and Blue Star possessing much higher revenue and profitable margins is undisputedly the more attractive investment opportunity.
The land-based aquaculture farming industry is growing incredibly quickly and will most likely be the future of seafood production. Both Blue Star Foods and AquaBounty are quickly expanding into this new budding industry. However, Blue Star today is proving to be the much more attractive investment opportunity for multiple reasons. Unlike AquaBounty, Blue Star is already profitable from existing operations, and through their acquisition of TBC, Blue Star is entering into the RAS farming industry with immediate and substantial production capacity. The company is wasting no time in expanding their RAS operations to include other products like soft shell crab, and finally, with a market cap of only $66.11 million is giving investors immense value and room for further upside.
Inflation is a market dynamic investors will have to deal with for the foreseeable future, and Blue Star Foods, with strong growth prospects, profitable operations, and a discounted valuation is a great way for investors to combat the risks of the current market.
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