Are You Nuts for Liking Diamond Foods, Inc. (DMND)?

Flowers Foods, Inc. (NYSE:FLO) bought out Tasty Baking, J&J Snack Foods Corp. (NASDAQ:JJSF) picked up several snack businesses, and Snyder’s-Lance — itself a product of a business combination — scooped up Snack Factory last year.

It was that trend of industry consolidation that had Diamond pursuing Pringles, and it would have made the company a formidable rival. As Kellogg’s recent quarterly results showed, the cereal maker is now the top snack-foods company behind PepsiCo, Inc. (NYSE:PEP)‘s Frito-Lay division, and it enjoyed an 18% surge in net revenues primarily as a result of Pringles.

So while there are still growth opportunities out there, it’s tempered by the knowledge that much of the big tie-ins are behind us.

The weight of the world
At more than 30 times earnings estimates, Diamond Foods, Inc. (NASDAQ:DMND) is more expensive than almost all of its rivals now. The stock is up 28% from its 52-week lows hit last November, a long way to come in such a short time. It’s still getting itself back on its feet financially, and though it’s turned the quarter on profitability, I think it’s still constrained about how far it can rise.

There are plenty of small privately held snack-food companies out there if it still wants to pursue a growth-by-acquisition strategy, though they’ll probably just add incrementally to its top and bottom lines. Instead, I think we’ll see Diamond Foods become a slow-growth stock rather than be momentum player, but let me know in the comments box below if you’d be willing to nibble on this snack-food specialist.

The article Are You Nuts for Liking Diamond Foods? originally appeared on

Fool contributor Rich Duprey has no position in any stocks mentioned. The Motley Fool recommends Flowers Foods, PepsiCo, and Procter & Gamble and owns shares of PepsiCo.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.