Is Diamond Foods, Inc. (DMND) Destined for Greatness?

So, how can Diamond get back there? Well it’s going to require stringent accounting controls from here on out. The announcement of a new CFO, concurrent with Diamond’s positive earnings, are reassuring investors that better days will come. New CFO Raymond Silcock brings decades of financial-operations experience to his new post, and has overseen the finances of several food-industry companies before. Investors may rightly assess the move as one meant to restore integrity to a formerly questionable part of the Diamond executive suite — Silcock should have no interest in ruining a career’s worth of accumulated goodwill just to fluff up Diamond’s finances.

On the other hand, Diamond Foods, Inc. (NASDAQ:DMND) might need to go back on the acquisition trail eventually, as its total quarterly revenue suffered an 11% year-over-year decline. Profits are on the upswing, but a company that posts declining top lines while its bottom line grows will probably fall under heightened scrutiny in due time. That time will be all the sooner for Diamond, owing to the shenanigans of its financial past. Further revenue declines are also expected in the upcoming quarter, which does not support the optimism of Diamond’s recent pop.

Losing out on the Pringles brand to Kellogg Company (NYSE:K) was salt in the wound for Diamond two years ago, and the industry seems to be engaged in a consolidative arms race of late, leaving Diamond with fewer options than it once had. Diamond is now one of the smallest publicly traded snack-foods specialists in the industry:

DMND Market Cap data by YCharts

At a quarter the size of Snyder S Lance Inc (NASDAQ:LNCE), Diamond could actually be a buyout candidate in its own right, assuming its larger competitors can come to trust its accounting. It would be an easy acquisition for either Kellogg Company (NYSE:K) or General Mills, Inc. (NYSE:GIS), neither of which has any notable nut or popcorn brands to speak of.

Putting the pieces together
Today, Diamond Foods, Inc. (NASDAQ:DMND) has few of the qualities that make up a great stock, but no stock is truly perfect. Digging deeper can help you uncover the answers you need to make a great buy — or to stay away from a stock that’s going nowhere.

The article Is Diamond Foods Stock Destined for Greatness? originally appeared on Fool.com and is written by Alex Planes.

Fool contributor Alex Planes holds no financial position in any company mentioned here. Add him on Google+ or follow him on Twitter, @TMFBiggles, for more insight into markets, history, and technology.The Motley Fool has no position in any of the stocks mentioned.

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