"How can it get any worse?" certainly has a place of
distinction among the most foolish validations that investors will try
to use with struggling companies, and Brazil's BRF SA (BRFS)
is a case in point. In addition to ongoing criminal investigations, BRF
has been effectively banned from the EU for the time being, is facing
rising costs and weak market share, has high debt and modest near-term
free cash flow prospects, and has to find a new CEO and craft a
turnaround strategy.
BRF's new board does appear to
be an upgrade, and the company still has some positives going for it -
including a meaningful overseas presence and a still-strong presence in
the Brazilian market. While the valuation may look modest relative to
the long-term potential of a successful turnaround, investors need to
appreciate that such a turnaround is going to take time, and success is
far from certain.
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BRF SA Looking At A Long Road Back
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