Hormel Foods Corporation (HRL): This Food Company Seems Expensive, As Do the Rest!

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Possible Alternatives

Alternatives to Hormel Foods Corporation (NYSE:HRL) include meat and food manufacturers of similar size, such as Tyson Foods, Inc. (NYSE:TSN), or larger, more diverse operations like General Mills, Inc. (NYSE:GIS), which provide more stability at the expense of lowered growth potential.

Tyson Foods, Inc. (NYSE:TSN) is a bit smaller than Hormel Foods Corporation (NYSE:HRL) by market cap, and is perhaps best-known for its chicken products, although it supplies a variety of beef and pork products as well. Tyson Foods, Inc. (NYSE:TSN) appears much cheaper at 13 times last year’s earnings, however a lower 8% forward growth rate is forecast for the company. Additionally, their balance sheet is not quite as impressive, with about $900 million more debt than cash. Another downside to Tyson is the lower dividend yield of just 0.8%, which is sure to dissuade some income-seeking investors.

General Mills, Inc. (NYSE:GIS), as mentioned, is a much larger company, with a market cap about triple that of Hormel. Shares of General Mills, Inc. (NYSE:GIS) trade for about 18.6 times TTM earnings, with a steady 7% growth rate projected, making shares seem a bit high. The company’s size and stability do warrant somewhat of a premium, and the 3.1% dividend yield is the highest of the three companies mentioned here. But for almost 20 times earnings, I’d invest in something with a little more growth potential.

Buy, Sell, or Hold?

For those who hold shares of Hormel Foods Corporation (NYSE:HRL), I would say that now might be a good time to take at least a little bit of your profits off of the table. While I think Hormel has a bright future, such a tremendous spike in the share price is hard to ignore (and hard to sustain), and there is nothing wrong with a gain of over 30% in the first five months of the year. This entire sector seems to be getting a bit overvalued and I would wait for a significant pullback before considering any new investment in these companies.

The article This Food Company Seems Expensive, As Do the Rest! originally appeared on Fool.com and is written by Matthew Frankel.

Matthew Frankel has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Matthew is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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