By Thomas Kerr, CFA
READ THE FULL SDOT RESEARCH REPORT
4th Quarter and Full Year 2024 Financial Results
On March 11, 2025, Sadot Group (NASDAQ:SDOT) reported 4th quarter and full year 2024 results which showed continued strength in the commodity trading business. In the latest filings, the restaurant operations have been reported as discontinued operations.
For the full year 2024, commodity related revenues decreased 2.3% to $700.9 million from $717.5 million in 2023. The decrease is primarily attributable to a decline in global commodity prices, market seasonality, and China being out of the market in the beginning of 2024. During 2024, Sadot completed 144 transactions of over 1.7 million metric tons of agri-commodities throughout 33 different countries.
Gross profit in the commodity segment for the year was $5.1 million (0.7% gross margin) and operating income was a loss of ($11.5) million. As the company builds out its platform in various regions, SG&A expenses have become temporarily elevated. As the commodity business matures and the business becomes more vertically integrated and transactions evolve beyond bulk trades, we expect operating margins to be in the 1.0%-3.0% range.
Despite a decline in sales and gross margins, adjusted EBITDA and net income were both positive and showed improvement over the prior year. Company defined EBITDA was $8.9 million in 2024 compared to an EBITDA loss of ($6.2) million in 2023. Net income was $4.0 million for the year, an improvement from a ($7.8) million loss in 2023. However, that net income calculation includes a loss from discontinued operations (restaurant group) of ($1.9) million. Net income from continuing operations was $5.6 million, or $1.26 per diluted share.
Cash at the end of the year was $1.8 million and net working capital was positive at $20.5 million. The company utilizes most of its cash for its revenue generating trading activities and therefore does not maintain large cash balances. Total company debt was $7.4 million at the end of 2024.
The Derivative Liability was $92.1 million at year end which relates to Forward Sales Contracts in which the company has pre-sold 140,000 tons of soybeans for $93.5 million. Half of the contract is due for delivery in May 2025 and the other half is due in July 2025. The company recognizes revenue upon delivery of the product to buyers.
Valuation and Estimates
We maintain our long-term price target of $15.00 at this time as we believe the company is on the path to generating increasing free cash flow going forward. High margin trading activity and increased ancillary services will help increase gross and operating margins.
Due to the variability and timing of trading results and sales contracts, EPS estimates are difficult to predict with any reliability. We are conservative in our EPS estimates and prefer to recognize free cash flow and margin improvements as the key factors in predicting our target price.
Our 2025 revenue estimate is adjusted to $723.6 million, and our new 2025 EPS estimate is $1.03.
SDOT stock is also trading at approximately 54.7% of book value per share (as of 12/31/24) whereas many peers in the commodity sector are trading 25%-50% above book value.
We believe Sadot’s current low Enterprise Value appears to be irrational and more reflective of the ongoing microcap stock malaise as opposed to company fundamentals.
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