The J.M. Smucker Company (SJM): Would Warren Buffett Buy This Stock?

Growth: Rising Dough

While a history of quality management and great performance is not a guarantee of the future, it certainly doesn’t hurt. The J.M. Smucker Company (NYSE:SJM) seems to have a firm handle on what it takes to run a company dedicated to the distant future and not just the next quarter.

Analysts are predicting a 10% earnings increase for the coming year. But The J.M. Smucker Company (NYSE:SJM) has continually surprised to the upside with 3 out of the last 4 quarters beating the consensus, and the 4th coming in line. It also appears that analysts are playing catch-up lately with 13 upward earnings revisions for 2013 in the last 30 days alone.

Competition: Tough Cookies

The J.M. Smucker Company (NYSE:SJM)’s main competition would be Hershey Co (NYSE:HSY) for the confectionery segment and General Mills, Inc. (NYSE:GIS) for the packaged, baking, and related items.

Valuation	Smucker	Hershey	General Mills
P/E	20	29	18.30
Forward P/E	16.45	22.23	17.04
Price/Book	2.11	18.22	4.59
Price/Sales	1.89	2.97	1.85
Long Term Debt/Equity	0.38	1.40	0.95
Average Five Year Sales Growth Rate	16.83%	6.02%	4.56%

A quick look at the table above shows that Smucker is the most attractive value play with the lowest Price/Book, Long Term Debt/Equity, and a near tie for Price/Sales. The J.M. Smucker Company (NYSE:SJM) was the clear outperformer in terms of sales over the last five years is also projected to have the lowest Forward P/E.

Conclusion: Yummy

So back to the original question. Would Warren Buffett want to own The J.M. Smucker Company (NYSE:SJM)?

When you consider the inelastic nature of the business, longevity, quality family management, and similar business strategies focused on the long term, I would find it likely that Warren Buffett has at least considered The J.M. Smucker Company (NYSE:SJM) in the past and may be doing so currently. In my estimation that not only makes this company a potential buy out target (a long shot), but also a solid play for the long term value investor.

The article Would Warren Buffett Buy This Stock? originally appeared on Fool.com.

James Catlin has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. James 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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