ConAgra Foods, Inc. (CAG): Should Investors Bite on This Stock?

ConAgra Foods currently yields 3%, Kraft Foods Group Inc (NASDAQ:KRFT) yields 3.70%, and Hillshire Brands Co (NYSE:HSH)yields 1.50%. Though some investors will look at a lack of dividend payments as a negative for TreeHouse Foods Inc. (NYSE:THS), it should be looked at as a positive, because it keeps the company fiscally responsible, which means Treehouse Foods is likely to hold up better than peers if the market suffers a steep correction.

Pricing is another concern for ConAgra Foods. As competitors lower their prices and offer promotions, ConAgra Foods stands firm on its pricing. This might work well for right now, but if the consumer weakens, then ConAgra Foods could find itself behind the curve. That said, the Ralcorp acquisition will provide ConAgra with impressive product diversification, which means strong demand is likely to come from somewhere.

Conclusion

ConAgra Foods, Inc. (NYSE:CAG) is a well-managed company that has accomplished product penetration in almost every home in the United States. Risks exist due to a weak consumer, but ConAgra Foods is constantly looking for ways to cut costs in order to maintain profitability. The Ralcorp acquisition gives ConAgra Foods tremendous potential, but debt is a concern.

Right now, upside potential outweighs downside risk for ConAgra Foods. But if you’re looking for safety, then Treehouse Foods is likely to be a better option.

Dan Moskowitz has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Dan is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article Should Investors Bite on This Stock? originally appeared on Fool.com and is written by Dan Moskowitz.

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