Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

ConAgra Foods, Inc. (CAG), General Mills, Inc. (GIS): Is Kellogg Company (K) Destined for Greatness?

Page 1 of 2

Investors love stocks that consistently beat the Street without getting ahead of their fundamentals and risking a meltdown. The best stocks offer sustainable market-beating gains, with robust and improving financial metrics that support strong price growth. Does Kellogg Company (NYSE:K) fit the bill? Let’s look at what its recent results tell us about its potential for future gains.

Kellogg Company (NYSE:K)

What we’re looking for
The graphs you’re about to see tell Kellogg Company (NYSE:K)’s story, and we’ll be grading the quality of that story in several ways:

Growth: Are profits, margins, and free cash flow all increasing?

Valuation: Is share price growing in line with earnings per share?

Opportunities: Is return on equity increasing while debt to equity declines?

Dividends: Are dividends consistently growing in a sustainable way?

What the numbers tell you
Now, let’s look at Kellogg Company (NYSE:K)’s key statistics:

K Total Return Price Chart

K Total Return Price data by YCharts

Passing Criteria 3-Year* Change Grade
Revenue growth > 30% 18.3% Fail
Improving profit margin (35.1%) Fail
Free cash flow growth > Net income growth (0.9%) vs. (23.2%) Pass
Improving EPS (19.3%) Fail
Stock growth (+ 15%) < EPS growth 34% vs. (19.3%) Fail

Source: YCharts.
*Period begins at end of Q2 2010.

K Return on Equity Chart

K Return on Equity data by YCharts

Passing Criteria 3-Year* Change Grade
Improving return on equity (31%) Fail
Declining debt to equity 43.9% Fail
Dividend growth > 25% 13.6% Fail
Free cash flow payout ratio < 50% 54.5% Fail

Source: YCharts.
*Period begins at end of Q2 2010.

How we got here and where we’re going
Things don’t look good for Kellogg Company (NYSE:K) today. The cereal maker musters only one out of nine passing grades, and even that single pass was granted more on a technicality than because of genuine improvement. Falling profit margins, resulting from a combination of higher materials costs and an ongoing price war with competitors, have been a major hindrance. There’s plenty of room for improvement, but will investors see real progress in the coming quarters? Let’s dig a little deeper to see what lies aheaf.

Page 1 of 2
Loading...