Comparing the Valuation Readings of Major Food Stocks



Kraft Heinz trades at a premium

In this final part of the series, we’ll discuss the valuation of our select set of packaged food manufacturing companies. The forward PE (price-to-earnings) valuation multiple should vary among companies based on factors such as the expected long-term growth rate and leverage.

On December 12, 2017, Kraft Heinz (KHC) stock was trading at a forward PE multiple of 20.8x, which is above the peer group average of 17.2x. The company is trading at a higher multiple than that of the Consumer Staples Select Sector SPDR ETF’s (XLP) forward PE multiple 21.3x. The S&P 500 Index (SPX) was trading at a forward PE multiple of 18.8x.

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Analysts project Kraft Heinz’s earnings per share (or EPS) to benefit the most from the pickup in demand and favorable currency rates. Analysts remain upbeat regarding the benefit from accretive acquisitions in the coming quarters, as Kraft Heinz has a strong history of acquiring fast-growing businesses.

J.M. Smucker (SJM) was trading at a forward PE multiple of 14.7x, which is below the peer group average. However, the company’s low valuation is not expected to attract investors, given the near-term headwinds that could restrict the company’s top-line and bottom-line growth.

Valuation summary for K, GIS, CAG, CPB, and MDLZ

On December 12, General Mills (GIS), Mondelēz (MDLZ), and Conagra Brands (CAG) stock were trading at 12-month forward PE multiples of 18.0x, 18.6x, and 19.6x, respectively. These PE multiples are above the peer group average.

Kellogg (K) and Campbell Soup (CPB) stock traded at forward PE multiples of 15.8x and 16.8x, respectively, on the same date.


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