As for Pepsico, at 52 week highs and with a smaller yield at 2.80% and a 19.58 P/E it’s not that compelling a story here. Likewise Coca-Cola is not far from 52 week highs and has a 2.90% yield with a 19.77 P/E.
At these stretched valuations and with public opinion so polarized I’d rather have the 4.00% yield from Kraft with a lower P/E at 18.31. (Note: I am in no way related to anyone at Kraft Foods. I wish.) Here too, Kraft closed at a 52 week high of $50.55 on March 12. (FYI that $0.50 per share quarterly dividend goes ex-dividend on March 29.)
Sin vs Celestial
What about The Hain Celestial Group, Inc. (NASDAQ:HAIN), beneficiary of the trend to healthier eating? It’s off close to 20% from its 52 week high but it has the highest P/E of all of these at 27.83 and with a PEG of 1.38 may still be overvalued at this level of $57.12.
Since it doesn’t have a yield like these other value and sin stocks its growth better be …well, better. Analysts expect 16.67% EPS growth for Hain over five years (yoy). Kraft’s EPS growth rate is 3.35% over the next five years. PepsiCo, Inc. (NYSE:PEP)’s 5 year EPS growth rate is 7.27% and Coca-Cola’s is 8.95%.
The Hain Celestial Group, Inc. (NASDAQ:HAIN) comes with caveats. It’s already up 31% over the last year, it has a high short interest of 17.70%, and its total debt of $645.66 million to total cash of $42.57 million is high despite the fact it has bought some accretive companies lately. These acquisitions included Blueprint, their foray into raw juices and two British brands, a nut butter and a jam brand.
The 20% decline in Hain’s share price has less to do with Hain than one of its main retail outlets, Whole Foods Market, Inc. (NASDAQ:WFM), which recently announced plans to cut prices to bring in traffic to its new smaller stores. Hain is also available on mainstream grocery shelves with a portfolio of over 45 products including well known brands like Celestial Seasonings, Earth’s Best, and Terra Chips, available in 50 countries.
As Hain guided considerably higher at its last earnings release on February 5 and reported record net global sales of $455.3 million for 2012, a 24% increase over 2011, any further pullbacks are like their yogurt brand, a gift from The Greek Gods and should be considered buying opportunities.
Are you hooked yet?
If you’re looking for value then Kraft Foods Group Inc (NASDAQ:KRFT) has it and is the best name among these big cap food processors in terms of yield, valuation and social responsibility. However, if you want growth at a 20% discount look for pullbacks in The Hain Celestial Group, Inc. (NASDAQ:HAIN). It is growing brands and adherents to its healthy eating that tastes good mission.
The article Why One Food Manufacturer Stands Tall originally appeared on Fool.com.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
