Nestle (NSRGY, NSRGF) is arguably the best food company in the world. It is number one or two in most of its product lines. The stock is owned by too many value funds to name. The stock is not cheap, by any means, but could go on sale some day.
The company has 3.11 billion shares and trades at a market cap of $243 billion. The dividend is $1.46 and dividend yield 1.88%. Earnings were $2.89 and the stock trades at a price to earnings ratio of 27. I'm not going to convert the Swiss franc into the dollar as the two are close to parity. No doubt, not a cheap stock.
Revenues were $83.8 billion in 2011, $92.3 billion in 2012, $92.3 billion in 2013, $91.9 billion in 2014 and $88.8 billion in 2015. Earnings per share were $2.97 in 2011 and $2.90 in 2015. No doubt, this major blue chip is not going gang busters, as growth has been slightly negative to tepid.
Operating margins are usually in the low teens and return on equity in the mid-teens. Free cash flow per share has increased from $1.25 in 2006 to $3.11 in 2015. The payout ratio is usually in the 50% to 60% range. Shares outstanding were decreased from 3.9 billion to 3.1 billion over that time frame. Nestle is a slow growth company, but it does indeed grow. Management has a goal of organic growth of 5% to 6%.
Some of the better known brands include: Kit Kat, Milo, Gerber, Purina, Friskees, Stouffer's, Dryer's, Lean Cuisine, Perrier, Haagan-Daas, and San Pelligrino water. I've excluded any product with the name "Nestle" in it, as it is obvious. This includes various chocolates and coffee creamers.
Of their sales, 57% are derived in developed markets and 43% in emerging markets. The growth comes from emerging markets and they were up 8.4% since 2013. Of their sales, 44% comes from the Americas, 31% from Europe/Middle East/North Africa and 25% from Africa and Southern Asia. Exchange rates affected sales by 7.4% in 2015. It was a crazy year for the Swiss franc.
According to an article in Fortune, Nestle recently hired Fresinius CEO Makr Schneider to take over the helm. Scheider plans to focus more on the health care divisions. These divisions include skin and food for Alzheimer's patients and people with gastrointestinal problems. With the aging global population, you can see why he is focusing on health care. Schneider increased earnings 12 fold at Fresinius.
The stock can be bought in the US on the pink sheets under the tickers NSRGY and NSRGF. The problem with how we invest in the US is that American stock brokers shun foreign stocks that trade on pink sheets. Too bad. Some of the best companies in the world refuse to register with the SEC. So when you walk into Joe Blow stockbroker, they don't have an analyst who covers these stocks and thus can't recommend shares.
Nestle is an expensive stock. I wouldn't recommend it at this price. However, at the right price, it could be a buy. It's the kind of stock that goes on sale maybe once or twice a decade. I recommend you wait.
Disclosure: We do not own shares.
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