Glanbia has diversified away from its traditional cheese products

This week Irish food group Glanbia was selected as one of Jefferies’ top 15 top buy-rated stocks primed for growth in 2015 - building on its status this year amongst the sector’s best-performing shares of 2014.

The performance nutrition and ingredients giant has been namechecked by the broker, alongside companies including BT, AXA, Bayer, Merlin, RBS and Smurfit Kappa, based on five potential stock price drivers: dividend/cash return, restructuring/portfolio change, growth, unjustified valuation discount and points of inflection.

Alex Howson, equity analyst at Jefferies, sees Glanbia as a “compelling value growth name” as it benefits from a strong position in the performance nutrition market with its protein powders, pre-workout supplements and muscle gainers and builders dominating the sector.

The company’s shares are already up almost 10% for the year, moving up from €10.50 and €11.50 throughout 2014.

Following an investor day in November to showcase the new sports nutrition manufacturing site in Chicago, the stock spiked to a high of almost €13. The $70m factory opened in September with Glanbia calling it the largest and most state-of-the-art facility of its type in the world.

Investec analyst Ian Hunter says the share price rise illustrated the growth potential of the company’s performance nutrition division (GPN). “Investors, and buyers, could see the size, capacity and efficiency of the plant they have out there,” he said. “Some of the gain will come back as it isn’t based on any news flow but it is the main driver going forward.”

Alex Howson says the quality and scale of the Chicago plant could be “game-changing”, elevating Glanbia’s production capabilities out of the reach of its competitors.

He adds: “The site’s opening concretises a gulf in production capabilities between GPN and the competition, whilst providing significant latent capacity for future growth and opportunity for margin enhancement.”

Earlier this year Glanbia acquired US-based Isopure Company, which makes premium branded sports nutrition products, for $153m (€118m) to add to its portfolio alongside Optimum Nutrition and BSN.

“Isopure is an excellent fit into the brand portfolio, being very premium and offering a natural product angle that is incremental to GPN’s overall offer,” Howson says.

The branded performance nutrition division accounts for 29% of Glanbia’s €2bn-plus sales and 40% of profits. Jefferies reports that the division had accounted for a 16% rate of compound annual revenue growth between 2012 to 2014 and was on track to become a €1bn business by 2016.

Overall, Glanbia is expect to record full-year earnings per share growth of 8% for the year to 31 December on 6% revenue growth to €2.52bn.

Glanbia is also rolling out its brands across multiple geographies, having grown its presence rapidly from eight international markets in 2011 to 22 currently. “What they are looking at, because they’re fairly well placed in the US, is expansion outside of the country,” Hunter adds. “They bought a company in Denmark and they will be looking to expansion into territories such as Germany. The main focus is the US, UK and Australia but it will be looking for exponential growth in other markets.”

Glanbia’s other core businesses in nutrition and ingredients also have strong market share positions, with the company dominating the US cheese and whey-based ingredients market, where it is planning more heavy investment. It also has mozzarella manufacturing plants in Cheshire, Anglesey and in Northern Ireland and a declining dairy arm in Ireland.

Another potential boost for investors is that its success has not gone unnoticed by its larger peers - Howson concludes that over time the group could make “a very interesting acquisition target”.