ConAgra Foods, Inc. (CAG): This Company’s New Strategy Should Mean Bigger Profits

Nestle: The Biggest In the Business

Nestle is the largest food company in the world, by revenues, and have one of the most diverse and extensive product lines of any business in the market. To name a few of their brands, Nestle produces coffee and tea products (Coffee Mate, Nescafe, Sweet Leaf Tea), bottled water (Deer Park, Perrier), chocolate (Baby Ruth, Butterfinger), ice cream (Haagen-Dazs), baby food (Gerber), and frozen foods (DiGiorno, Hot Pockets).

Nestle pays a slightly better dividend yield of 3.2% but trades at a higher valuation of 18.9 times fiscal year 2013’s earnings. The company also has less projected growth and has almost completely capitalized on the international potential of its business, an area in which ConAgra Foods, Inc. (NYSE:CAG) still has tremendous room for growth.

Unilever: Not Just Food

Unilever plc (ADR) (NYSE:UL) is a leading supplier of food products, but also has an extensive line of home and personal products. The company’s food brands account for just under half of the total sales and include Knorr, Wish-Bone, Country Crock, SlimFast, Lipton, and Breyers. The home and personal products make up the rest of Unilever’s sales and include such brands as Snuggle, Surf, Axe, Suave, and Vaseline.

Unilever plc (ADR) (NYSE:UL) trades for 17.4 times the current fiscal year’s earnings, but is only projected to grow its earnings at around 7% annually going forward. While the company does pay a healthy 3% dividend yield, I’m hesitant to invest in any company with significant exposure to the European economy right now.

Summary

Not only is ConAgra Foods, Inc. (NYSE:CAG) the most ambitiously growing of these food companies, it is also the cheapest. The company’s new emphasis on private label food products makes it even more recession-resistant than it already was due to their products’ lower cost structure and the increased efficiency that the acquisition will bring.

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

The article This Company’s New Strategy Should Mean Bigger Profits originally appeared on Fool.com and is written by Matthew Frankel.

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