Recall that stagflation is categorized as slowing economic growth combined with an inflationary environment. Although unemployment is holding up reasonably well at the moment (exclusive of recent softness in college grad hiring), and tariff price impacts have yet to fully manifest and may prove transitory, the seeds are clearly evident. While not akin to the more acute stagflation of the late 70’s, economists are labeling the current situation more as “stagflation-lite”.

Here we highlight 2 small cap food plays of a more defensive nature which should weather the stagflation storm. Food is generally a non-discretionary product category with lower price elasticity which typically doesn’t experience demand destruction from elevated pricing during a slowing economy. Gotta have it so to speak.

Village Super Market, Inc. (VLGEA) operates 34 supermarkets under the ShopRite and Fairway banners in New Jersey, New York, Maryland, and Pennsylvania, along with three Gourmet Garage specialty markets in New York City. Village is the second-largest member of the Wakefern Food Corporation, the largest retailer-owned food cooperative in the United States.

Village Super Market continues its program to upgrade and expand its supermarket chain, which includes store remodels and opening new stores. It has allocated $75 million for capital expenditures in fiscal 2025 for projects such as the construction of replacement stores in East Orange and Watchung, NJ.

For the fiscal third quarter, Village Super Market reported earnings per share for Class A common stock of 75 cents compared to 60 cents a year earlier. Sales rose 3.2% year over year to $563.7 million from $546.4 million, driven by a 1.9% increase in same-store sales.

Net income of $11.2 million marked a 24% increase from $9 million a year ago. Adjusted net income came in at $11.6 million, up 21% from $9.6 million in the prior-year period.

Consistently strong operating cash flow has been a hallmark of the stock while also offering a 2.6% dividend yield as a kicker.

The stock is currently trading at 0.19X trailing 12-month EV/sales value, which compares to 1.15X for the Zacks sub-industry, 1.79X for the Zacks sector and 5.07X for the S&P 500 index.

Over the past five years, the stock has traded as high as 0.22X and as low as 0.1X, with a five-year median of 0.15X.

The stock is currently trading at 4.08X trailing 12-month EV/EBITDA TTM, which compares to 18.37X for the Zacks sub-industry, 13.35X for the Zacks sector and 16.75X for the S&P 500 index.

Over the past five years, the stock has traded as high as 5.63X and as low as 2.66X, with a three-year median of 3.99X.

The other small cap, Armanino Foods of Distinction, Inc. (AMNF), is engaged in the production and marketing of upscale and innovative frozen and refrigerated food products. The company’s offerings include a wide variety of pesto sauces, frozen stuffed pasta, pasta sheets, cooked meat products and cheese shakers. These products are distributed through food brokers and sold to retail, foodservice, club-type stores and industrial accounts.

In the second quarter ended June 30, 2025, Armanino posted net sales of $19.97 million, up 14% from $17.48 million in the year-ago period. Gross profit rose 26% year over year to $9.11 million, reflecting both higher sales volumes and improved margins. Net income climbed 27% to $4.85 million, translating into earnings per share (EPS) of 15.44 cents, a 30% increase from 11.86 cents a year earlier.

As of June 30, 2025, $4.65 million remained authorized for future buybacks and the company pays a dividend yielding 1.6%.

The stock is currently trading at 3.81X trailing 12-month EV Sales/TTM, which compares to 1.57X for the Zacks sub-industry, 9.54X for the Zacks sector and 5.71X for the S&P 500 index.

Over the past five years, the stock has traded as high as 3.85X and as low as 1.57X, with a 5-year median of 2.28X.

The stock is currently trading at 12.45X trailing 12-month EV/EBITDA TTM, which compares to 12.19X for the Zacks sub-industry, 36.72X for the Zacks sector and 18.50X for the S&P 500 index.

Over the past five years, the stock has traded as high as 34.45X and as low as 9.89X, with a 5-year median of 12.34X.

While likely not multi-baggers in the near term, these 2 small caps fit the profile of a “steady eddie”, or moderate ongoing appreciation potential. Both stocks currently have a Zacks Outperform rating.

— Mark Zinski

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Source: Zacks