CPB Generates Strong Cash So Why Are You Not Considering It?
Here is why we think Campbell’s (CPB) is worth a look
- Cash Yield: Not many stocks offer free cash flow yield of 7.6%, but CPB does
- Fundamentals: Last 12 month revenue growth of 8.6% and operating margin of 12.9% show good fundamentals
- Valuation: At PE of 21.0, this combo of cash yield, revenue growth, and margin could get noticed
- Compared to S&P, you get lower valuation, higher revenue growth, but lower margins
Free Cash Flow Yield refers to free cash flow per share / stock price. Why it matters? If a company produces high amount of cash per share, it can be used to fuel additional revenue growth, or simply paid through dividends or buybacks to shareholders. For quick background, Campbell’s provides food and beverage products, including retail and foodservice meals, snacks like cookies and crackers, serving markets in the U.S. and Canada internationally.
| CPB | S&P Median | |
|---|---|---|
| Sector | Consumer Staples | – |
| Industry | Packaged Foods & Meats | – |
| Free Cash Flow Yield | 7.6% | 3.9% |
| Revenue Growth LTM | 8.6% | 5.0% |
| Revenue Growth 3YAVG | 6.6% | 5.8% |
| Operating Margin LTM | 12.9% | 18.8% |
| Operating Margin 3YAVG | 13.2% | 17.7% |
| PE Ratio | 21.0 | 23.5 |
But do these numbers tell the full story? Read Buy or Sell CPB Stock to see if Campbell’s still has an edge that holds up under the hood.
That is one way to look at stocks. Trefis High Quality Portfolio evaluates much more, and is designed to reduce stock-specific risk while giving upside exposure
The Point? The Market Can Notice, And Reward
Here are some stocks that showed strong cash flow yield in mid 2024, and saw strong returns in the subsequent 12 months
- FFIV gained 70% in a year after showing a 6.9% free cash flow yield
- CSCO had 6.6% yield, and returned 50% in the next 12 months
- PM rose over 85% percent as the market noticed its 5.7% free cash flow yield and good underlying revenue growth
But Consider The Risk
That said, CPB isn’t immune to big drops. It fell 53.5% in the Dot-Com Bubble and nearly 38% during the Global Financial Crisis. The 2018 correction wasn’t kind either, with a 47% dip. Even the Covid pandemic and inflation shock caused pullbacks of 23% and 32%, respectively. The stock shows resilience but still takes hits when the market sells off hard.
Picking winners on a consistent basis is not an easy task – especially given the volatility associated with a single stock. Instead, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming the S&P 500 over the last 4-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.