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Shareholders are pleased by Maple Leaf Foods Inc.'s decision to explore a sale of its stake in Canada Bread Co. Ltd. Over the past three days, Maple Leaf's stock has jumped 15.2 per cent, to $15.32.

It would be easy to assume any potential gains in the stock are already, um, baked in. But a closer look suggests there still may be a way to make more dough from the shares, if the company can follow through with a deal.

Let's look back a bit, first. Maple Leaf Foods' shares underwhelmed, to be polite, for years. Its 2010 plan to spend over $1-billion modernizing its plants left investors cold, but attracted activist investor Greg Boland of West Face Capital, which snapped up more than 10 per cent of the company late that year. Mr. Boland joined the board, Maple Leaf Foods honed its turnaround plans, and the shares had, by this summer, nearly doubled from their 2010 lows.

The company is still slogging through its restructuring, promising to be out of the woods by 2015. In the meantime, it's subject to periodic earnings disappointments, like the one announced in July that shaved 10 per cent off the stock in two days.

The company previously insisted that the combination of its 90-per-cent stake in Canada Bread and its "protein" (i.e. meat) operations made a synergistic combo. But the math behind a possible split-up suggests the shares may benefit if the meat and bread are sold separately.

Here, courtesy of TD Securities analyst Michael Van Aelst, are some of the numbers. There have been two dozen deals in the bread and baked-good space over the last dozen years. The average acquisition price has been at an enterprise value – equity plus net debt – of 9.9 times the acquired company's EBITDA, or earnings before interest, taxes, depreciation and amortization.

Mr. Van Aelst figures that since Canada Bread holds the No. 1 position in the country, with a roughly 43 per cent market share "in a virtual duopoly with upside potential for margins," a buyer would ante up an above-average multiple for the business.

He also projects that Canada Bread, coming off an EBITDA margin of about 10.6 per cent in the last 12 months, should be able to push that number to 12 per cent in the coming year thanks to lower wheat prices and eliminated overhead costs.

By applying an EV/EBITDA multiple of 11 to that forecast, he arrives at a price of just over $2-billion for Maple Leaf's Canada Bread stake – which works out to about $14 per Maple Leaf share. That is very close to the company's current share price. Buy the bread, get the meat for almost nothing!

Want to be more conservative? Figure that the bakery division's margin stays at about 10.6 per cent, and Maple Leaf can get just a 10 multiple. That still yields more than $1.6-billion, or $11.50 per share, in proceeds, and suggests a value of $18 for all of Maple Leaf. (More aggressive? A 13 multiple on a 12.6 per cent margin pushes the overall valuation to roughly $24 per share.)

This analysis led Mr. Van Aelst to bump up his target price Tuesday from $17 to $20. Not only could a sale of the bakery business provide cash, it would also eliminate what he calls a "holding company discount" that investors place on Maple Leaf because it is neither a pure-play bread or meat company.

That could open up the remaining meat-driven company to a takeover, as well. CEO Michael McCain, who owns 33 per cent of the company, insists the meat business is not for sale. However, Mr. Van Aelst notes, politely and accurately, that "everything is typically for sale at the right price" and that the remaining company might be in receipt of "an aggressive bid" once it completes its restructuring – or if it fails to meet profit targets.

What are the hazards of this thesis? Well, the company could decide not to sell its bakery business – analysts believe the company expects to be paid based on the potential for improved profits, not the numbers it put up over the last year. Mr. Aelst, for the sake of valuation, puts a 25 per cent probability on a no-sale scenario, and suggests $17 is a more appropriate price for the company in that event.

Hopefully, Maple Leaf Foods' board will realize this would not be an appetizing outcome.