We came across a bullish thesis on Nomad Foods Limited (NOMD) on Substack by Nicolas Boudreau. In this article, we will summarize the bulls’ thesis on NOMD. Nomad Foods Limited (NOMD)’s share was trading at $19.55 as of March 20th. NOMD’s trailing and forward P/E were 12.77 and 11.14 respectively according to Yahoo Finance.
An aisle lined with shelves of fresh and frozen foods in a supermarket store.
Nomad Foods is a leading European frozen food company, known for brands like Birds Eye, Findus, and Iglo. It operates in a stable industry with long-term growth potential, driven by increasing consumer demand for convenience and high-quality frozen meals. The company was built through acquisitions led by Noam Gottesman and Martin E. Franklin, two highly successful investors with backgrounds in hedge funds and SPAC deals. Gottesman, the founder of GLG Partners, has a history of unlocking value in underappreciated companies, and his firm, TOMS Capital, recently played a key role in Kellanova’s $35 billion sale to Mars. Franklin, a major SPAC industry player, has a track record of executing lucrative deals, making their involvement in Nomad Foods a crucial factor in its strategic direction.
Nomad’s financial performance is showing signs of strength despite past headwinds. In Q3 2024, revenue grew by 0.8% to €770 million, and more importantly, volume growth turned positive at 0.7%, reversing a post-COVID trend of declines due to inflation-driven consumer shifts to private labels. Adjusted EBITDA increased by 19% to €166 million, while gross margin reached a record 32.3%, up 390 basis points. The company’s turnaround efforts are beginning to pay off, supported by its “Must Win Battles” strategy, which focuses on strengthening core brands, expanding market share, improving operations, and driving innovation. Poultry and potatoes are expected to be key growth drivers, while the ice cream segment, though seasonal, has been gaining market share in select markets.
The European frozen food sector remains underpenetrated compared to the U.S., providing a structural tailwind for Nomad Foods. The industry’s historical 2–3% annual volume growth is expected to continue, creating a favorable backdrop for the company. Additionally, Nomad has increased advertising and promotional spending in 2024 and plans to raise it further in 2025 to strengthen brand awareness and sales. The company benefits from its leadership position, enjoying strong relationships with major grocery chains, which gives it an edge over smaller competitors in launching new products and driving distribution efficiencies.
A key aspect of Nomad’s investment appeal is its strong alignment of management incentives with shareholders. The board and executives collectively own 17.7% of the company, ensuring their focus remains on increasing shareholder value. If the market continues to undervalue the company, management may explore a sale, similar to the TOMS Capital-led deal for Kellanova. To close the valuation gap, Nomad introduced a dividend in 2024 and increased it by 13% in early 2025, which could help it gain entry into key dividend growth indexes. Share buybacks are also a priority, with the company repurchasing 6% of its outstanding shares in 2023.
Nomad generates €250–300 million in free cash flow annually, allocating around €80 million for CAPEX. With €88 million now earmarked for dividends, management retains flexibility in deciding between share buybacks and debt reduction. The company’s debt load, currently at €2.1 billion, is higher than industry peers, with a leverage ratio of 3.7–4.0x adjusted EBITDA compared to the CPG industry’s preferred 2.5x level. This higher leverage may be a reason for the stock’s current discount, but it also presents an opportunity. With no major acquisitions planned, Nomad’s capital allocation focus remains on rewarding shareholders and improving its financial profile.
Nomad Foods Limited (NOMD) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 27 hedge fund portfolios held NOMD at the end of the fourth quarter which was 24 in the previous quarter. While we acknowledge the risk and potential of NOMD as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NOMD but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.