For a while now, investors have been wondering if The Kraft Heinz Co (KHC, Financial) is a value stock. On the one hand, why else would Charlie Munger (Trades, Portfolio) and Warren Buffett (Trades, Portfolio) continue holding shares of the stock in the Berkshire Hathaway (BRK.A, Financial)(BRK.B, Financial) portfolio? However, its share price has been in decline for quite a while since Buffett and Munger picked up the position.
Over the last few days, it’s finally seeming like Kraft Heinz might be taking a turn for the better. The stock has been uptrending again on news of good earnings results and product developments to keep up with changing consumer tastes. Not only that, but heavier than usual volume is accompanying the higher prices, which is typically a good confirmation.
Buffett helped to bring the Kraft and Heinz companies together, along with private equity outfit 3G Capital, back in 2015. Just four years later, he was admitting that he had paid too much for the companies. After Kraft Heinz stock bottomed during the March 2020 pandemic market sell-off, it finally rallied into early 2021 before tanking again through early 2022.
While the 2020 and 2021 price changes were due mostly just to broader market trends, this seemed to change late last week and this week as the Berkshire Hathaway-owned equity began uptrending with higher volumes. This, during a period of uncertainty for the stock market as a whole, is another indicator of unusual strength.
The American packaged food company is huge with a total market capitalization of $49.44 and an enterprise value of $65.48 billion. Available for purchase right now at exactly its book value, a good case could be made that it’s a value stock, but the price-earnings ratio of 49.27 seems a little steep. Perhaps the forward price-earnings ratio of just 15.08 is helping to bolster investor enthusiasm.
The price-sales ratio is a low 1.87 and the price-to-free-cash-flow ratio is a generous 19.44. Kraft Heinz's shareholder equity exceeds its long-term debt and the current ratio is a positive 1.00. Earnings per share this year are up by 180.70%. The past five-year EPS growth rate is -25.80%.
Investors receive a $1.60 per share quarterly dividend for an annualized yield of 3.96%, making the company one of the highest dividend payers in the Berkshire Hathaway portfolio.
The GuruFocus financials summary of Kraft Heinz shows two good signs, three medium warning signs and two severe warning signs:
The Kraft Heinz daily price chart looks like this:
We can see how the stock is coming alive in the last few days with the higher prices and the heavy volume. Note how quickly it’s back above both the 50-day moving average (the black line) and the 200-day moving average (the green line) – and how it’s above both recent highs.
