Amidst the daily fluctuations of the stock market, investors constantly seek assets that promise a balance between value and growth. With a notable daily gain of 2.45% and a modest 3-month gain of 1.93%, Campbell Soup Co (CPB, Financial) presents an intriguing case for value investors. The company's Earnings Per Share (EPS) of $2.56 further pique interest. But the pressing question remains: Is Campbell Soup Co modestly undervalued? This article delves into the valuation analysis of Campbell Soup Co, offering readers a detailed overview of its current market standing.
Company Overview
Campbell Soup Co has a storied history spanning over 150 years, during which it has become a dominant force in North America's packaged food sector. Beyond its iconic canned soup, the company boasts a diverse portfolio including brands like Pepperidge Farm, Goldfish, and Snyder's of Hanover. With the recent acquisition of Rao's, Campbell Soup Co continues to expand its reach. The company's revenue streams are impressively diversified, with snacks contributing 50%, soups 29%, other simple meals 13%, and beverages 8%. The majority of its revenue, nearly 90%, is generated within the US, with the remainder coming from Canada and Latin America.
Comparing the current stock price of $43.99 to the GF Value of $51.29, an intrinsic value estimate, suggests that Campbell Soup Co may indeed be modestly undervalued. This discrepancy sets the stage for a deeper evaluation of the company's intrinsic worth.
Understanding the GF Value
The GF Value is a unique metric that calculates the intrinsic value of a stock. It incorporates historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and projected business performance. A stock trading significantly above the GF Value Line may be overvalued, potentially leading to poor future returns. Conversely, a stock trading well below this line could be undervalued, suggesting higher future returns.
For Campbell Soup Co, with a market cap of $13.10 billion and a stock price of $43.99, the GF Value indicates that the stock might be modestly undervalued. This assessment suggests that investing in Campbell Soup Co could potentially yield higher long-term returns relative to its business growth.
Link: These companies may deliver higher future returns at reduced risk.
Financial Strength Assessment
Investing in companies with robust financial strength is crucial to minimize the risk of capital loss. Key indicators such as the cash-to-debt ratio and interest coverage provide insight into a company's financial resilience. Campbell Soup Co's cash-to-debt ratio stands at 0.04, which is lower than 90.07% of its peers in the Consumer Packaged Goods industry. This figure leads to a financial strength ranking of 5 out of 10, indicating that Campbell Soup Co's financial health is fair.
Profitability and Growth Prospects
A history of profitability, particularly with high profit margins, often signifies a safer investment. Campbell Soup Co has maintained profitability for the past decade. With a 12-month revenue of $9.30 billion and an Earnings Per Share (EPS) of $2.56, its operating margin of 13.13% ranks above 81.27% of the industry. This strong performance awards Campbell Soup Co a profitability rank of 8 out of 10.
Growth is a vital valuation factor, often correlating with a company's long-term stock performance. Campbell Soup Co's 3-year average annual revenue growth rate of 2.8% falls below 65.34% of industry counterparts, while its EBITDA growth rate of 6.1% is also lower than 50.84% of the industry, indicating room for improvement.
ROIC vs. WACC Analysis
Comparing a company's Return on Invested Capital (ROIC) to its Weighted Average Cost of Capital (WACC) can reveal its value creation efficiency. Campbell Soup Co's ROIC of 8.93 exceeds its WACC of 4.06, indicating that it generates cash flow well above its capital costs, creating value for shareholders.
Conclusion
In summary, Campbell Soup Co appears to be modestly undervalued. The company's financial condition is fair, and its profitability is robust. However, its growth ranks below a significant portion of its industry peers. For a more comprehensive understanding of Campbell Soup Co's financials, investors can explore its 30-Year Financials here.
To discover high-quality companies that may deliver above-average returns, consider using the GuruFocus High Quality Low Capex Screener.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
