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Genus (LSE: GNS) is a growth stock of FTSE 250 An index that doesn't get a lot of media coverage. It was down 71% in three years, and it wasn't getting much love from investors.
After months of buying a large harvest FTSE 100 stocks, I am open to injecting a little mid-cap growth into my portfolio. But does Genus stock fit the bill? Let's find out.
Breeding 'superior' cattle and pigs
Speaking of stocks, the company is a global leader in animal genetics. It analyzes DNA to find the strongest genetic profiles, helping farmers breed cattle and pigs with superior traits. This results in higher milk production in dairy cows and better meat quality.
Genus operates in two main categories. First, there is PIC, which stands for Pig Promotion Company (I like the simple representation of their work). It was built in the early 1960s in a village pub in Oxford. Then there is ABS, which specializes in cattle genetics.
The breed's competitive edge comes from the ownership of proprietary breeding lines and the biotechnology used to develop them. For example, PIC owns the Camborough sow line, which produces large litters and chicks with strong growth rates. It is the most used pig in pig production around the world.
Why is the stock low?
Recently, the firm's sales have been particularly weak in China, the world's largest pork market. Low prices there have seen producers make losses, while challenging conditions continue in other markets.
Today (September 5), the company reported the progress of these methods. In the year to 30 June, revenue in real terms fell 3% year-on-year to £669m. Adjusted operating profit fell 9% to £78m as PIC China profits fell 60%.
Outside of China however, PIC trading was strong and market conditions “they are stable in slow development“. Profits are expected to increase this year due to proper savings.
However, management remains wary of China and there is a risk of currency problems if current exchange rates persist. So the near-term outlook here remains dim.
Genetically engineered pigs
Notably, the company used CRISPR gene editing technology to develop a new generation of pigs resistant to PRRS (porcine reproductive and respiratory syndrome). This is a highly contagious virus that causes significant economic losses in the global pork industry.
Genus has received favorable regulatory decisions in Brazil and Colombia for PRRS-resistant pork, and the US Food and Drug Administration (FDA) is expected to approve it in 2025.
It is also submitting applications to regulators in Canada and Japan, and testing is beginning in China.
This program may one day help eradicate a major infectious disease in pigs. It would be a huge improvement.
Should I invest in Genus?
In the long term, the increase in the world's population should only increase the demand for animal protein, as well as the demand for the firm's products.
However, shares trade at a forward earnings ratio of 26.5. That's a pretty steep climb considering the company's growth has stalled recently.
paid a dividend of 1.8 %. So not much from an income perspective.
On reflection, I would like to buy some stocks today. But I've put it on my watch list for a genetically engineered pig. It could be a turning point in the global pork industry and the growth of the firm.
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