2.5x Your Money in Three Years with French Fish Fingers: Nomad Foods Limited $NOMD

In an effort to restore balance, after writing about an unprofitable, stock-issuing, high-tech, AI-native Canadian microcap, allow me to introduce you to a profitable, share-repurchasing, low-tech, frozen-food, European market leader, Nomad Foods (NOMD).

I don’t have to swing for the fences every time, sometimes it’s enough to find a boring, stable company with a potential to 2.5x your investment in about three years. In the past I have mostly avoided the consumer staple sector, as the valuations and the torque never seemed to suit my style. But when you combine sector outflows from staples with an idiosyncratic corporate stumble, Nomad is a company with enough torque to pique my interests.

Nomad Foods launched in 2015 with the purpose of rolling up the frozen food businesses of Europe. But those acquisitions were done carefully, management required that every purchase would lead to at least 25 million Euros of annual structural cost savings, and that they wouldn’t pay more than 9x EBITDA. Not only did they succeed on their acquisition metrics, but careful management also generated about 4% organic revenue growth per year on top of the acquisitions.

Following the interest rate hikes of 2022, the consumer became more choiceful, and the organic revenue growth slowed down. Growth was still positive through 2024, but 2025 brought stagnation to Nomad. Management had the opportunity to blame the hottest European summer in 500 years, but instead they chose to blame themselves for not having enough barbecue friendly options on the store shelves in anticipation of the summer season. That’s an excellent contrast to the CEO of Crocs who blamed the terrible HeyDude acquisition on shareholders for pushing him to diversify revenues.

Nomad Revenue:

The rollup isn’t finished, there is still more of Europe to conquer, but management has been balancing capital allocation between dividends and share repurchases, and with the recent stock price collapse, it is likely that they will increase the proportion spent on share repurchases. But if the opportunity presented itself to acquire a leading frozen food company in Eastern Europe, I would not be surprised if management seized the chance. Due to management’s constant ability to deliver on acquisition synergies, I would not be discouraged by it, even if it delayed multiple rerating by another year.

Any sort of multiple rerating would require a return to organic growth, is a return to growth likely? Yes, I believe so. Unlike the last staples company I wrote about, Seneca Foods (SENEA), which was a leader in the shrinking market of canned foods. Not only is Europe’s frozen foods market projected to grow by about 5% annually through 2032, but Nomad is taking market share within that market despite a consumer under pressure. With falling interest rates, tariff certainty, and a possible end to the Ukraine war, at some point Europe will return to a normal consumer environment. In those normal times, consumers are focusing on healthier options, and aside from pizza and ice cream, most of Nomad’s offerings are lean proteins and vegetables. Management has committed to growing free cash flow by 15% in total over the next three years, and I think they have a good shot at doing it.

Management has been executing exceedingly well over these last ten years; I suffered through learning about how they navigated Brexit, Trump’s 2016 tariff war, the Covid supply chain crisis, the post Covid bullwhip, the UK’s HFSS regulations, and finally the Ukraine War. I assume you don’t really want to know about how and why they switched their fish fingers from cod to pollack, just look back at the revenue trend line above and know that management navigated every crisis magnificently up until they finally had their first stumble in 2025 on Europe’s warmest summer in 500 years coinciding with a destocking cycle.

A large part of value investing is trying to judge which problems are temporary and which are permanent. Management has promised to spend more time being pessimistic and thinking about those problems which might arise so that they aren’t caught off guard again. Having successfully navigated nine out of the last ten years, I believe them. And it’s not as though this recent stumble is catastrophic, it only brought revenue down to being flat for the year.

There is a bear case of course, management could suddenly start making less tasty food, but it would be hard to anticipate novel failures after ten years of successes. The largest risk is usually capital allocation and a bad acquisition, but management has been making only good acquisitions. The debt burden is large with about $2.4 billion of long term debt, but the nearest maturity is 2028, and about a third of the debt has a very attractive 2.5% fixed coupon, the rest is floating rate at SOFR or EURIBOR + 2.5%. With my own predictions that inflation will be higher for longer, I love companies with long term fixed debt. How much easier will that debt be to repay when fish fingers sell for 8 Euros a box in Carrefour instead of 4.75? With the rate cutting cycle still about half way through, it’s hard to imagine we would see interest rate increases for at least the next two years.

Since 2015, Nomad has spent a little over $1 billion on share buybacks. In Q1 of 2024, management initiated a dividend of $0.15 per quarter, or about $100 million per year. It is taboo to cut dividends, and I would have personally preferred the prior focus on 100% share buybacks, but nothing is perfect. Free cash flow was 292 million Euros for full year 2024, and management is guiding for it to be 15% higher three years from now. Assuming that management spends about $50 million on share buybacks annually, at the current share price, the float could shrink another 8% by 2028.

Today Nomad has about 292 million Euros of free cash flow spread across 152 million shares. By the end of 2028, Nomad could have free cash flow of around 350 million Euros, spread across 137 million shares, or about $2.94 of free cash flow per share. Today Nomad trades at $11.20 per share, or about 5.8x free cash flow per share, the lowest multiple in its history. By 2028, the same $11.20 share price would be 3.8x 2028 free cash flow. For most of the last ten years, Nomad traded well over 10x free cash flow, reaching a peak of 19x free cash flow for a share price of about $26 in 2021.

Nomad EPS:

I have calculated the valuation by price to sales, price to book, price to earnings, price to free cash flow, and it all comes out about the same, a return to past peak valuation on a smaller share base would be about a 3.5x return. Trimming that estimate to make it a bit more conservative, and I think that Nomad could be a 2.5x over the next three years. And while you wait, it’s paying about a 6% dividend yield, which when added to the 2.5x over three years would be about a 41% compound rate of return. If I’m wrong and it takes five years for that price target, the rate of return would drop to 26%. Not too bad for a bunch of French fish fingers.

Perhaps the biggest flaw is that Nomad has a stock price chart that does not yet show any sign of stabilizing. It has reached it’s cheapest multiples in its public history, and it has blown through all resistance levels and does not yet show any signs of stopping. If you would like to start a small position and watch for any signs that Nomad has found a floor, I wouldn’t find that imprudent. There’s no need to be brave and catch a falling knife, no matter how much you love frozen breaded Alaskan pollock.

Nomad Foods (NOMD) $11.20: $28 by the end of 2028