Mission Produce, Inc. (AVO) stock intrinsic value fair value estimate & owner earnings analysis

Mission Produce is the world's largest vertically integrated avocado business: it sources fruit from company-owned and partner farms in Peru, Mexico, Guatemala and Colombia, packs and ripens it, and distributes it to grocery, foodservice and wholesale customers, mainly in the United States but also in Canada, the United Kingdom and China. A smaller Blueberries segment, added in 2022, grows and sells blueberries from Peru. The business is genuinely cyclical: year-to-year results swing with weather in the growing regions. A short crop (as happened in the 2024 season) pushes avocado prices sharply higher even as volume stays flat; a strong crop (as in 2025) brings prices back down while volume recovers. The same pattern shows up in blueberries, where a supply-driven price spike in 2024 reversed in 2025 as regional production recovered, actually causing blueberry segment profit to fall even though blueberry sales rose. None of this is something we can extrapolate as durable growth — it nets out over a full cycle rather than compounding. What is more durable is the acreage the company has been planting in Peru and Guatemala over the last several years, plus new packing and distribution capacity (a new Guatemala packhouse and a UK distribution facility). Avocado and blueberry plantings take several years to reach full production, so this spending shows up as cash outlay well before it shows up as volume. That is exactly what happened: heavy capital spending between 2020 and 2023 depressed our cash-based measure of owner earnings in those years, while the payoff is now visible in higher volumes in 2024 and 2025. Management guides to roughly $40 million of capital spending for fiscal 2026, well below the $50-73 million spent annually earlier in this buildout, which tells us the heavy-investment phase is largely behind the company. For that reason we anchored our base case on the three most recently completed fiscal years rather than a longer, mechanically-averaged period that would still be penalizing the company for a construction program that has already finished. A specific and important caveat: partway through fiscal 2026 (after the most recent audited annual report, which covers only through October 2025), the company raised roughly $350 million of new debt and spent about $247 million on an acquisition, alongside a meaningful increase in shares outstanding. Nothing in the filings available to us describes what was acquired or what it earns. Rather than guess, we have valued the company's existing, pre-acquisition avocado and blueberry business on its own, while still counting the new debt as a real claim against shareholders. This is a deliberately conservative choice: if the acquisition proves sound, this analysis understates the company's worth, and it should be revisited once the next annual report discloses what was bought and what it contributes. Our base case assumes the business generates cash in line with its recent, post-buildout run rate, growing modestly for several years as already-planted acreage matures, then leveling off once that program is fully phased in — we have not assumed any further price gains or new expansion beyond what is already underway. On that basis the ongoing business is worth roughly $12.50 per share; against roughly $4.70 per share of net debt and minority interest (after the fiscal 2026 borrowing), that nets to about $7.75 per share. Our bear case assumes a repeat of the kind of weak year the company has already experienced twice in the last four years (2022 and 2023), when a mix of soft pricing and heavy investment spending pushed cash generation negative, followed by a persistently thinner margin environment due to oversupply in blueberries and continued friction in Mexico-U.S. trade policy (brief tariffs on Mexican-origin goods actually applied for a few days in 2025 before being exempted under USMCA). In this case, the ongoing business is worth only about $2.90 per share — less than the roughly $4.70 per share it owes once the new debt is counted, meaning the bear case is a business that owes more than it is worth by a small amount per share. Our bull case assumes the newly matured acreage delivers on the high end of the yields the company has already demonstrated, with no further shocks. That would make the ongoing business worth roughly $16.50 per share, or about $11.85 per share after debt. Given the size and the lack of disclosure around the recent acquisition, plus the real cyclicality in crop pricing, the margin-of-safety price is set at a large discount to our base-case estimate, and greater confidence depends on the company's next annual report explaining what was acquired and confirming the enlarged debt load can be serviced through a weak crop year.