ConAgra Foods, Inc. (CAG): This Food Giant Can Make Your Portfolio Fat

Nestle SA Reg Shs. Ser. B Spons (ADR) (OTCMKTS:NSRGY) is the largest food company in the world, both in terms of market cap and revenue. It has a diverse product line that includes baby food, chocolate, ice cream, coffee and tea, bottled water, etc. Some of its popular brands are Nescafe, Haagen-Dazs, Gerber, and Hot Pockets. Even though Nestle pays a slightly better dividend yield of 3.2% as compared to ConAgra Foods, Inc. (NYSE:CAG)’s 2.8%, it is currently trading at a higher P/E, PEG, and P/S multiple as compared to ConAgra, which makes ConAgra better valued than Nestle. The quarterly revenue growth of Nestle is also lower than ConAgra. Moreover, ConAgra has immense potential to diversify its business globally and increase its growth, whereas Nestle has almost no scope to grow as it has already capitalized upon its international diversification.

Kraft Foods Group Inc (NASDAQ:KRFT) has also been one of ConAgra Foods, Inc. (NYSE:CAG)’s major competitors. Kraft is the ex-parent of Mondelez International Inc (NASDAQ:MDLZ) and post its spin-off, it has been focusing on grocery markets in North America. Kraft has a higher debt-to-equity ratio of 2.66, as compared to ConAgra’s 2.07. With a trailing P/E ratio of 20.63, Kraft is the most expensive among the three companies. Also, the market values Kraft at 17.4 times its forward earnings, as compared to ConAgra’s 12.8. Although Kraft provides a better dividend yield of 3.7%, it is looks expensive to me.

Foolish bottom line

After the Ralcorp Holdings, Inc. (NYSE:RAH) acquisition, ConAgra Foods, Inc. (NYSE:CAG) has a net debt of around $9.2 billion and a negative tangible book value of $6.5 billion. In spite of being highly leveraged, ConAgra looks attractive to me. It is relatively cheap compared to its peers and has great potential synergies from the Ralcorp acquisition. With an impressive earnings report, ConAgra has strengthened its position in the food industry. I am bullish on this stock and the returns from this stock should definitely make your portfolio fat!

The article This Food Giant Can Make Your Portfolio Fat originally appeared on Fool.com and is written by usha patodia.

usha patodia has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. usha 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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