-$0.50
$3.30
bear -$0.50
base $0.10
bull $3.30
margin of safety $1.00
market price* $14.29
Business condition attached to the margin of safety
Annual capital spending holding at or below roughly 3% of sales (about $45 million) while operating cash flow before working-capital swings stays near or above $65 million, which would put true cash earnings after stock compensation at roughly $20 million a year or more.
Utz Brands makes and sells salty snacks in the United States: potato chips, pretzels, tortilla chips, pub and party mixes and cheese snacks under Utz, On The Border, Zapp's, Boulder Canyon, Golden Flake, Hawaiian Brand and Miguelito's. Sales have been broadly flat for three years ($1.41 billion in 2022, $1.44 billion in 2023, $1.41 billion in 2024 after selling the Good Health and R.W. Garcia brands, and $1.44 billion in 2025). Sales for the first half of 2026 were $733 million, about 2% above the first half of 2025. How we measure earnings. We start with cash from operations, remove swings in receivables, inventory and payables, subtract stock-based pay as a real cost, and subtract the capital spending needed to keep the business running. Per share, on all 143 million economic shares (87.5 million Class A shares plus 55.3 million exchangeable units held by the pre-merger owners), that gives $0.19 in 2021, then $(0.19) in 2022, $(0.03) in 2023, $(0.23) in 2024 and $(0.37) in 2025. Four of five years are negative because Utz has been spending heavily on plants and equipment as it moves production in-house and adds capacity: capital spending was $32 million in 2021 (2.7% of sales), then $88 million, $56 million, $99 million and $103 million (7.1% of sales) in 2025. Depreciation and amortization of $82 million a year is not a cash cost and is not deducted. 2025 operating cash flow of $112 million was also helped by selling receivables to a third party, ending an interest-rate swap and stretching payables; we strip out that working-capital effect. What we treat as normal. The five-year median is about $(0.19) per share, but it is dominated by the capital program. In the first half of 2026 capital spending fell to $27 million from $66 million a year earlier (3.7% of sales), and operating cash flow was about break-even against a $4 million outflow. That is a seasonally weak half and only two quarters, so we do not lift the level fully. Our base case uses the median cash from operations before working-capital swings over 2021 to 2025 (about $67 million), less about $17 million of stock pay, less capital spending at about 3.4% of sales (the average of 2021, 2023 and the first half of 2026, about $49 million). That leaves roughly break-even. Base case, about $0.10 per share. Break-even earnings with no growth. We credit no growth: sales have not grown in three years, and new-product wins, geographic expansion, cost savings and margin gains are plans rather than results already in hand. Last year's cash earnings per share fell (from $(0.23) to $(0.37)), and we assume flat rather than rising from here. Bear case, about $(0.50) per share. Capital spending stays near 2024-2025 levels (roughly $100 million) for two more years, costing about $40 million a year after other items, and then settles at break-even. The company carries a bank term loan and an asset-based credit line secured by substantially all its assets, at a 5.6% average interest rate in 2025, which is why a shortfall in cash weighs directly on shareholders. This case suggests the shares are worth less than nothing on our numbers, by roughly 50 cents each. Bull case, about $3.30 per share. Cash from operations before working-capital swings repeats the $84 million achieved in 2024, and capital spending returns to the 2.7% of sales seen in 2021 (about $39 million), leaving about $29 million a year, roughly the $0.19-per-share result of 2021 held permanently. We do not add growth on top. Stress test. The key assumption is that capital spending has peaked. Against it: 2022, 2024 and 2025 were all above 6% of sales and the company describes ongoing capacity expansion. For it: 2021 and 2023 were 2.7% and 3.9%, and the first half of 2026 was 3.7%. If the elevated level persists, the base case turns into the bear case. Value is highly sensitive to a few tens of millions of dollars of spending, which is why the margin-of-safety price is set well below even the bull case and depends on capital spending staying low. What we could not reconcile. Segment-level profitability is not disclosed in enough detail for us to separate growth spending from upkeep spending, so we treat nearly all capital spending as upkeep unless sales grew, and we describe the sensitivity above.