Pinnacle Foods Inc (PF): Will This Company Bite Off More Than It Can Chew?

The Foolish Bottom Line

In closing, I believe that Pinnacle Foods is an ambitious company that has room to grow. Although it appears that it could be biting off more than it can chew by eyeing Wish-Bone and Del Monte’s canned food business, investors should remember that high debt is fairly common in the packaged foods industry, which tend to grow through acquisitions, rather than organically.

Source: Yahoo Finance, 7/15/2013

However, Pinnacle Foods still has a very high debt-to-equity ratio, which will only soar higher if it goes through with the Wish-Bone and Del Monte acquisitions. Therefore, I believe that it would be prudent for investors to wait for the company’s second quarter earnings release on August 2 to decide if Pinnacle’s growth potential can justify these big purchases, or if the company should hang back and reduce its debt before growing further.

Leo Sun has no position in any stocks mentioned. The Motley Fool recommends Unilever.

The article Will This Company Bite Off More Than It Can Chew? originally appeared on Fool.com and is written by Leo Sun.

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