A Sweet Tasting Company

Austin is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

The J.M. Smucker Company (NYSE: SJM) recently announced they will be offering a quarterly cash dividend of $0.52. Also, they announced a new campaign of stock repurchases. Is Smucker a good buy?

J.M. Smucker manufactures and markets branded food products direct to consumers. Their food line includes peanut butter, fruit spreads, frostings, beverages, and more. They have a couple dozen different brand names under which they offer their products including Dunkin Donuts, Folgers, and Smucker to name a few. They have been around since 1897 and, in my opinion, have the best Strawberry Jam there is.

J.M. Smucker isn't without major competition. Campbell Soup Company (NYSE: CPB) engages in the manufacturing and producing of consumer products as well. They have a long history and a very strong brand. They are slightly larger than Smuckers, with a market cap of $12.31 billion, and serve customers all over the world with various products in various international markets. Another industry competitor is ConAgra Foods (NYSE: CAG) who operates primarily in North America with their private label food products and condiments that are sold in various retail outlets. Some of the brands incorporated under their company are Healthy Choice, Blue Bonnet, Egg Beaters and Peter Pan among others. 

J.M. Smucker has had an impressive year so far. They have gained 13.15% with a lot of those gains in the last 6 months. But, Campbell Soup Company and ConAgra Foods. have had even more impressive years with 20.71% and 25.21% gains, respectively.

<img src="/media/images/user_16267/screen-shot-2013-02-11-at-44721-pm_large.png" />
Taken from Fool.com

Let’s take a look at their fundamentals in comparison to two of their main competitors.

<table> <tbody> <tr> <td><strong>Ratio</strong></td> <td><strong>SJM</strong></td> <td><strong>CPB</strong></td> <td><strong>CAG</strong></td> </tr> <tr> <td><strong>Quick Ratio</strong></td> <td>1.08</td> <td>.47</td> <td>.76</td> </tr> <tr> <td><strong>Current Ratio</strong></td> <td>2.46</td> <td>.78</td> <td>1.7</td> </tr> <tr> <td><strong>Debt to Equity</strong></td> <td>.40</td> <td>4.05</td> <td>.79</td> </tr> <tr> <td><strong>Debt to Assets</strong></td> <td>.23</td> <td>.51</td> <td>.29</td> </tr> </tbody> </table>

In comparison, J.M. Smucker has a greater short-term economic health in that their current assets cover their current liabilities. Also, their debt levels are considerable lower than both of these competitors when compared to their equity and assets. At a snapshot, J.M. Smucker has greater economic health even though their return has been less than their competitors. This could mean there are still more gains to be had in the near future.

Their gross margin and net profit margin are higher than most in their industry, at 33.56% and 8.26%, respectively. Their return on equity is 9.06%, which is a solid return.

They are liquid, healthy, and have a steady return on equity. Their profit margin is near the high end for their industry. These are signs that point to a solid, fundamental investment.

There has been a gradual increase in earnings per share over the last 11 quarters shown by the trend line. Analysts are expecting the next quarter’s earnings to decline to $1.20 per share.

<img src="/media/images/user_16267/screen-shot-2013-02-12-at-95334-am_large.png" />

Currently, the distribution of analysts' opinion of SJM skews towards hold. But, still, there is a strong "buy" consensus from nearly one third of all analysts. 

  • Buy - 16
  • Hold - 32
  • Sell - 4

With earnings coming out February 15, what should we expect? Their earnings were just upgraded to outperform, so perhaps there will be a solid quarter results coming to investors.

DisclaimerAt the time of this writing, I do not have any position (long or short) in any of the companies mentioned. I have not entered in to a position within the last two days nor will I in the next two days. 

Austin Higgins is the Principal Consultant for Build. Invest. Grow. and focuses on building businesses through innovation, growth and investment. Learn more at BuildInvestGrow.com and follow him on Twitter @Austin_Higgins


higginsaustin has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

blog comments powered by Disqus