The last time I wrote about Kraft Foods Group, Inc. (KRFT) I bought a small batch stating that I thought I could get it at a cheaper price in the near future. The stock did indeed move downwards to the tune of 4.17% but has since then recouped some of those losses. The stock is down 1.03% since last writing the article versus the 2.39% gain the S&P500 (SPY) posted. Kraft operates food and beverage businesses in North America including convenient meals, refreshment beverages and coffee, cheese and other grocery products. On October 30, 2013, the company reported third quarter earnings of $0.70 per share, which beat the consensus of analysts' estimates by a penny. In the past year the company's stock is up 19.88% excluding dividends (up 22.89% including dividends), and is losing to the S&P 500, which has gained 27.28% in the same time frame. With all this in mind, I'd like to take a moment to evaluate the stock on a fundamental, financial, and technical basis to see if it's worth buying more shares of the company right now for the consumer goods sector of my dividend portfolio.
The company currently trades at a trailing 12-month P/E ratio of 17.05, which is fairly priced, but I mainly like to purchase a stock based on where the company is going in the future as opposed to what it has done in the past. On that note, the 1-year forward-looking P/E ratio of 16.74 is currently fairly priced for the future in terms of the right here, right now. The 1-year PEG ratio (1.18), which measures the ratio of the price you're currently paying for the trailing 12-month earnings on the stock while dividing it by the earnings growth of the company for a specified amount of time (I like looking at a 1-year horizon), tells me that the company is fairly priced based on a 1-year EPS growth rate of 14.42%. The company has great near-term future earnings growth potential with a projected EPS growth rate of 14.42%. Below is a comparison table of the fundamentals metrics for the company for when I wrote all articles pertaining to the company.
EPS Next YR ($)
My Target Price ($)
EPS next YR (%)
On a financial basis, the things I look for are the dividend payouts, return on assets, equity and investment. The company pays a dividend of 3.92% with a payout ratio of 67% of trailing 12-month earnings while sporting return on assets, equity and investment values of 8.1%, 45.5% and 13.7%, respectively, which are all respectable values. The really high return on equity value (45.5%, tops in the Major Diversified Foods industry) is an important financial metric for purposes of comparing the profitability, which is generated with the money shareholders have invested in the company to that of other companies in the same industry (for comparison purposes, Lancaster Colony Corporation (LANC) sports a ROE of 27.2%, and WhiteWave Foods (WWAV) sports a ROE of 12.7%). Because I believe the market may get a bit choppy here and would like a safety play, I believe the 3.92% yield of this company is good enough for me to take shelter in for the time being. Below is a comparison table of the financial metrics for the company for when I wrote all articles pertaining to the company.
Payout TTM (%)
Looking first at the relative strength index chart [RSI] at the top, I see the stock muddling around in middle-ground territory with upward trajectory and a value of 54.70, indicating a bullish pattern. I will look at the moving average convergence-divergence [MACD] chart next. I see that the black line is above the red line with the divergence bars increasing in height, indicating a bullish pattern. As for the stock price itself ($53.55), I'm looking at $54.89 to act as resistance and $51.59 to act as support for a risk/reward ratio, which plays out to be -3.66% to 2.5%.
I believe the stock is now fairly valued based on future earnings and growth potential. Financially the company has improved its returns on assets and equity. On a technical basis I'd expect the stock to trend upwards for the short term and for these reasons I will be buying a big batch in the stock right now.
Disclaimer: This article is meant to serve as a journal for myself as to the rationale of why I bought/sold this stock when I look back on it in the future. These are only my personal opinions and you should do your own homework. Only you are responsible for what you trade and happy investing!