Post Holdings Inc (POST): Scout Capital Management Nears 7%

We can also compare Post Holdings Inc (NYSE:POST) to diversified food companies Kraft Foods Group Inc (NASDAQ:KRFT) and ConAgra Foods, Inc. (NYSE:CAG). The dividend yield looks quite high at Kraft Foods Group Inc (NASDAQ:KRFT), at 4% going by recent payments, and that company is also somewhat defensive with a beta of 0.4. In terms of value, however, we are more skeptical as the trailing earnings multiple is 19 (matching GM); it’s probably best to wait for another quarter or two of results unless the dividend is just too rich for an investor to pass up. ConAgra Foods, Inc. (NYSE:CAG)’s net income fell 57% last quarter versus a year earlier, despite a rise in revenue. Wall Street analysts do expect the company to recover, with a forward earnings multiple of 15, but again we would recommend avoiding it until ConAgra Foods, Inc. (NYSE:CAG) has shown stronger performance and looks likely to hit its targets.

None of these food companies looks cheap enough to be that appealing to us, when we consider that their earnings are unlikely to rise by enough over the next couple years to justify the current price. In particular we do think that multiples have partly been driven up by acquisition hopes, and buying into a situation like that doesn’t seem wise. Following Scout into Post Holdings Inc (NYSE:POST) therefore isn’t a good idea in our view.

Disclosure: I own no shares of any stocks mentioned in this article.