General Mills, Inc. (GIS), Groupe Danone SA (DANOY) & Kellogg Company (K): Should We Invest in Those Food Giants Now?

Kellogg Company (NYSE:K) is the most expensively valued food company among the three. At $63.50 per share, Kellogg is worth more than $23.30 billion on the market. It has the highest EBITDA multiple at 14.3. The company’s strategy is to be the global player in both cereal and snacks markets. Moreover, it would also like to become the regional frozen foods leader, building its footprint in emerging markets. In the snack business, with several brands, including Pringles and Cheez-It, has become the number two global savory snack company. For the full year 2013, Kellogg Company (NYSE:K) expected to deliver around 7% growth in net sales, including Pringles. The EPS growth was estimated to stay in the range of 5%-7%. Excluding the integration costs and mark-to-market accounting impact, its adjusted EPS might come in at $3.82 – $3.91 per share. Interestingly, Kellogg has recently announced a $1 billion share repurchase plan, expiring in April 2014. A $1 billion could create a buyback yield of nearly 4.3% at its current trading price. Like Danone and General Mills, Inc. (NYSE:GIS), Kellogg Company (NYSE:K) also pays shareholders a good dividend yield at 2.8%.

My Foolish take

Income investors might consider all three businesses to hold in a long run for their decent dividend yield. However, with double digit EV multiple, General Mills, Inc. (NYSE:GIS), Groupe Danone SA (PINK:DANOY) and Kellogg Company (NYSE:K) do not seem to be cheap. I would prefer lower prices to initiate significant positions in each of those three food businesses.

The article Should We Invest in Those Food Giants Now? originally appeared on Fool.com and is written by Anh Hoang.

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