With a 7.2% yield, is now the time to buy this dirt cheap stock?

Investing in cheap stocks can generate explosive stock market gains. Rolls-Royce shareholders have learned that firsthand over the last few years, enjoying a staggering 1,200%+ return after new management turned the once-sinking ship around.

The challenge, of course, is figuring out which stocks are cheap for a good reason and which ones are hidden bargains.

In my experience, a good place to start is looking at the worst-performing shares over the last 12 months. And right now, Hilton Food Group‘s (LSE:HFG) on that list.

After two share price crashes in 2025, the stock’s now trading near a decade-low. The forward price-to-earnings ratio now stands at an attractive 8.9 with a dividend yield of 7.2%. But if the broker forecasts are right, the share price could surge by as much as 92% by this time next year!

So is this a screaming bargain that investors should rush to buy? Let’s find out.

What happened to Hilton Food Group?

While not a household name, most consumers interact with Hilton’s products every day. The company’s a British food producer and packer that supplies private-label products to leading retailers around the world. As such, when buying packaged steak or fish fillets from Tesco, there’s a good chance Hilton prepared them.

In 2025, the company encountered numerous surprise challenges. This included a massive 44% slash to whitefish fishing quotas in the North Sea that triggered significant price inflation for the protein. With UK consumers already under financial pressure, whitefish volumes tumbled on the back of affordability concerns.

Meanwhile, the group’s Foppen business had its own set of challenges with regulatory intervention disrupting salmon shipments to America. And with the later US government shutdown delaying operational restarts, Foppen was left in limbo.

These enormous headwinds effectively crippled Hilton’s seafood segment. And with profit warnings subsequently emerging alongside a weakened outlook for 2026, the share price understandably crashed.

A cheap turnaround stock?

Despite the numerous problems this business has encountered, there’s room for optimism. Fishing quotas are ultimately cyclical, while the regulatory hurdles for Foppen are slowly being worked out. Meanwhile, management’s currently executing an operational review to identify where new efficiencies can be implemented.

As external headwinds soften and normalise, the demand destruction for white fish should taper off as inflationary forces ease and consumers adjust to the new price environment. In the meantime, demand for its meat, vegan, and convenience meals seems to still be intact, generating solid and slowly expanding cash flows.

Combined, that certainly sets the stage for a potential recovery. And it explains why institutional analysts are placing aggressive share price targets, especially if the operational review unlocks new shareholder value.

However, it’s important to recognise that until the seafood situation is resolved, the recovery timeline remains unclear.

Economic weakness across the UK, US, and Europe could keep consumer spending on fish weak. And based on management’s cautious comments about 2026, the recovery analysts are expecting it may take much longer than 12 months to materialise.

The collapse of free cash flow generation back into negative territory is also a concern, along with the sudden jump in the group’s net debt position.

Nevertheless, with these concerns seemingly already priced into the stock, Hilton Food Group could be worth a deeper investigation for patient investors.

The post With a 7.2% yield, is now the time to buy this dirt cheap stock? appeared first on The Motley Fool UK.

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Zaven Boyrazian has no position in any of the shares mentioned. The Motley Fool UK has recommended Tesco Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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