Lifeway (LWAY)

[gfp927z]

Looking at valuation, if we assume an EPS recovery from the recent dismal .03/shr back to an average of say .05/shr per quarter over the next year, then we still have a forward PE of 61. Such a high valuation can only be sustained if we see a return to rapid revenue/earnings growth. Yahoo's forward PE estimate of 44 assumes a return to the .07/shr EPS levels of Q1 and Q2.

The company raised prices across the board which could help, but that strategy might backfire if the higher prices cut into sales. Revenues were already flat from Q2 to Q3. The other big wildcard is whether/how much milk prices will moderate.

Bottomline, I figure a repeat of the last .03 cent EPS quarter could put the stock well under $10, but a .05 cent EPS quarter might justify the current valuation.