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Near 52-Week Lows And Still Overvalued: Skip Hormel

Mar. 09, 2023 6:37 PM ETHormel Foods Corporation (HRL)9 Comments
Kevin Mackie profile picture
Kevin Mackie


  • Hormel, a long-time darling of dividend investing enthusiasts, had a bad quarterly report and the stock is down 13%.
  • In spite of the drop, I argue that Hormel is still overvalued based on my appraisal of their future prospects.
  • 2023 is shaping up to be the year where Hormel's earnings ratio finally comes down to realistic levels and stays there.
SPAM For Dinner


It's been three years since my last article on Hormel (NYSE:HRL). Much has changed over that time frame, and I believe it worthwhile to follow the same format with this article as I did in the prior: conduct a valuation

This article was written by

Kevin Mackie profile picture
Value strategies resonate with me, and I don't relegate myself to any sector or industry. You could say I am an equal opportunity investor: if a company meets my investment criteria, I will buy. Big picture, I look for three main things in a stock before I consider it for investment: Does the company have a product or service that will be in demand in the future? Does the company have a demonstrated history of success and are they on solid financial footing today (i.e., a manageable debt load and strong cash flow generation)? Can I purchase their stock for a reasonable price? If I can verify each of these things, I then look at how that company deploys their free cash flow to enrich their shareholders. Capital allocation is key. Money needs to be spent on the right thing at the right time, meaning that debt reduction should be prioritized over a dividend in most instances. Annual reports are also important to find any red flags or factors that strengthen the case for investment. That is the skeleton of my process, and it has served me well thus far. I appreciate engaging in intelligent dialogue with the SA community and look forward to learning with other users.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (9)

I got out with a small profit just in time. When HRL dips to 25$ I’ll reconsider getting back in. The company as whole is not going out business. Glta
Sourdough98 profile picture
HRL is a good example of a dividend king that is overpriced because it is included in all of the right indexes. About half of all funds invested in the USA are in index funds. For HRL it truly is putting lipstick on a pig. Good business but way overpriced relative to its cashflow. My fair price is closer to $22.
Kevin Mackie profile picture
@Sourdough98 excellent point
Kevin Mackie profile picture
@Sourdough98 that brings up the matter of the domino effect that might occur as the stock price drops and dividend growth slows, it will get lower on and drop out of those indexes. Which will make the price drop further.
Sourdough98 profile picture
@Kevin Mackie Also, when there is a panic and indexes are selling hard then smaller cap shares like this will crash harder because the sell volume spikes higher and there will not be enough bids to cover the volume.
Old Professor profile picture
Cautionary review, for which thank you. I'm interested at approx. $30 a share.
wam350 profile picture
I'll continue holding
wam350 profile picture
@Kevin Mackie
Like shopping there, in a clean environment. Drive past HD to shop at LOW, just put a bid in for more this morning.
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