However, General Mills, Inc. (NYSE:GIS) is a much larger business, with a market cap of $32 billion compared to Campbell Soup’s $14 billion, so slower year-on-year growth was expected. Yet over the past five years, General Mills has significantly outperformed Campbell Soup on both top and bottom line growth, but this could change with Campbell Soup’s stabilization of its soup business and further improvements in beverages.
Meanwhile, Mondelez International Inc (NASDAQ:MDLZ), which was spun off of Kraft Foods last year, is the 800-pound gorilla in the snack foods segment. Mondelez creates some of the most well known cookies and candy in the world, including Oreo, Chips Ahoy!, Ritz, Toblerone and Cadbury. It also sells packaged beverages such as Tang.
During its most recent quarter, Mondelez International Inc (NASDAQ:MDLZ)’s adjusted earnings per share and revenue plunged 40.4% and 33.2%, respectively, from the prior year quarter. Although those numbers looked bleak, analysts are still bullish regarding the company’s growth prospects in emerging markets, which comprises 40% of its top line.
A comparison of these three companies’ fundamentals reveals that Campbell Soup Company (NYSE:CPB) isn’t the best choice in the sector, but it is still a decent alternative to General Mills. Mondelez, on the other hand, has much stronger growth potential than either Campbell Soup or General Mills, but it is prone to wild price swings due to its heavy exposure to volatile emerging markets.
Forward P/E | 5-year PEG | Price to Sales (ttm) | Return on Equity (ttm) | Debt to Equity | Operating Margin | Profit Margin | |
Campbell Soup | 16.83 | 3.18 | 1.85 | 62.08% | 390.39 | 16.32% | 9.12% |
General Mills | 16.77 | 2.41 | 1.86 | 22.14% | 95.22 | 16.78% | 10.41% |
Mondelez International | 17.60 | 1.65 | 1.60 | 5.22% | 57.95 | 11.76% | 7.93% |
Advantage | General Mills | General Mills | Mondelez International | Campbell Soup | Mondelez International | General Mills | General Mills |
Source: Yahoo Finance, 5/21/2013
The Foolish Bottom Line
If Campbell Soup Company (NYSE:CPB) can keep maintain the momentum in its soup segment and turn around its V8 brand, then investors can expect this stock to rally to new highs. In addition, it still pays a 2.40% quarterly dividend.
Meanwhile, its competitor General Mills has risen 26% over the past twelve months as well. Therefore, I believe that these stocks from the packaged foods sector, along with consumer goods, are excellent core holdings for conservative, income-focused investors, especially when the market is constantly flirting with all-time highs. In the stock market, slow and steady wins the race more often than you might think.
The article Can This Packaged Foods Giant Keep Growing? originally appeared on Fool.com and is written by Leo Sun.
Leo Sun has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Leo is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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