So far, Conagra Brands (CAG) stock has risen more than 35% in 2019. However, the stock looks attractive. Conagra Brands’ valuation is still within reach. Conagra Brands stock trades at a forward PE ratio of 14.0x, which is ~18% lower than its historical average multiple of 17.0x. Conagra Brands stock also trades at a lower valuation compared to its peers. The stock trades ~21% lower than the peer group average of 17.7x.
Conagra Brands’ revenues are expected to grow at a brisk pace in the coming quarters due to acquisitions and continued strength in its legacy business. Price restructuring, cost-savings, and a favorable mix are expected to support the operating margin.
We expect Conagra Brands’ earnings to stay low in the near term. However, the company’s bottom line will likely return to the growth trajectory in the second half of fiscal 2020, which reflects lower pressure from interest expenses. Management’s favorable commentary on Pinnacle’s integration and execution is also an encouraging sign.
Analysts’ ratings and target price
Among the 14 analysts covering Conagra Brands stock, 11 recommended a “buy,” two recommended a “hold,” and one recommended a “sell.” Analysts’ consensus target price of $33.38 per share on Conagra Brands indicates an upside of 15.2% based on its closing price of $28.98 on June 18.