Mead Johnson Nutrition CO (MJN), Abbott Laboratories (ABT): Which Infant Formula Stock is a Best Buy Now?

China is also a big part of Danone’s operations, contributing as much as 6% of the total sales to the company, behind Russia, France and USA. In the baby nutrition market, Danone is also a big player, taking around 14.8% of the total market share in the total milk in modern trade. It planned to accelerate its double-digit growth in this country through the relaunch of Dumex, entry into the Hong Kong market, and e-tailing management.

Valuation

Even after the significant decline on the market, Mead Johnson Nutrition CO (NYSE:MJN) seems to be quite expensive. It is trading at $69.30 per share, with a total market cap of around $14 billion. The market values the company at as high as 17.1 times its trailing EBITDA. Danone has a lower valuation than Mead Johnson. At $14.30 per share, Danone is worth $42.50 billion on the market. It is valued at 11.6 times its trailing EBITDA. Abbott is the cheapest among the three, with a much lower EBITDA multiple. It is trading at $34.90 per share, with a total market cap of $54.40 billion. The market values Abbott at only 4.58 times its trailing EBITDA.

My Foolish take

Mead Johnson might take action by cutting their infant formula prices in China, following the path of Nestle and Danone. Consequently, it would certainly affect the company’s bottom line negatively in the near future. Among the three, I like Abbott the most as it has the least exposure to the infant formula market, along with the diversified business. Moreover, it is trading at a much lower valuation compared to both Danone and Mead Johnson.

The article Which Infant Formula Stock is a Best Buy Now? originally appeared on Fool.com.

Anh HOANG has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Anh 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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