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Mondelez International Inc (MDLZ) is Severely Overlooked

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Mondelez International Inc (NASDAQ:MDLZ) is a global snack food company formerly known as Kraft Foods. Earlier this year, Mondelez spun off its North American grocery business, which now trades as Kraft Foods Group Inc (NASDAQ:KRFT).

Mondelez’s business is expected to generate upwards of $36 billion in revenue this year, where over 80% is derived from outside of North America. We are also reinforced by Mondelez’s exposure to high-growth markets – Latin America and Asia – which should make up close to 45% of revenues. Warren Buffett remains the top fund owner of Mondelez despite an almost 50% selloff of his shares last quarter (check out Warren Buffett’s newest picks).

hedge fund research

Mondelez’s outlook is much better following the split, where it appears to be the quintessential growth play and Kraft Foods Group the dividend-payer – KRFT currently pays a massive dividend yield of 4.4%. Offering further growth potential for Mondelez is the integration of its 2010 acquisition of confectionery company Cadbury.

What is most intriguing about Mondelez is its overwhelmingly cheap valuation. The food company trades at 14x earnings and a P/S of only 0.9x – both the cheapest of the five food stocks mentioned here. Given Mondelez’s industry-low debt ratio of 30% and industry-high 5-year expected EPS growth, we believe that the food company should trade more in line with its peers, say an average of 1.5x sales. Placing a 1.5x P/S on Mondelez’s year-ahead top line estimates shows potential upside of 20%.

Check out how Mondelez stacks up against key competitors…

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