Campbell’s Stock To $15?

Campbell’s (CPB) stock has fallen 7.1% during the past day, and is currently trading at $22.94. Our multi-factor assessment suggests that it may be time to sell CPB stock. We have, overall, a pessimistic view of the stock, and a price of $15 may not be out of reach. We believe there are several things to fear in CPB stock given its overall Weak operating performance and financial condition. Hence, despite its Low valuation, this makes the stock look Risky.

Below is our assessment:

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Let’s get into details of each of the assessed factors but before that, for quick background: With $6.8 Bil in market cap, Campbell’s provides food and beverage products internationally, with retail and foodservice operations in the U.S. and Canada, including snacks like cookies, crackers, and frozen bakery items.

[1] Valuation Looks Low

This table highlights how CPB is valued vs broader market. For more details see: CPB Valuation Ratios

[2] Growth Is Inconsistent

• Campbell’s has seen its top line grow at an average rate of 4.5% over the last 3 years
• Its revenues have grown 2.7% from $9.9 Bil to $10 Bil in the last 12 months
• Also, its quarterly revenues declined -3.4% to $2.7 Bil in the most recent quarter from $2.8 Bil a year ago.

This table highlights how CPB is growing vs broader market. For more details see: CPB Revenue Comparison

[3] Profitability Appears Moderate

• CPB last 12 month operating income was $1.3 Bil representing operating margin of 12.7%
• With cash flow margin of 11.1%, it generated nearly $1.1 Bil in operating cash flow over this period
• For the same period, CPB generated nearly $578 Mil in net income, suggesting net margin of about 5.7%

This table highlights how CPB profitability vs broader market. For more details see: CPB Operating Income Comparison

[4] Financial Stability Looks Weak

• CPB Debt was $7.0 Bil at the end of the most recent quarter, while its current Market Cap is $6.8 Bil. This implies Debt-to-Equity Ratio of 106.1%
• CPB Cash (including cash equivalents) makes up $168 Mil of $15 Bil in total Assets. This yields a Cash-to-Assets Ratio of 1.1%

[5] Downturn Resilience Is Moderate

CPB saw an impact slightly worse than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.

2022 Inflation Shock

• CPB stock fell 33.9% from a high of $57.55 on 27 December 2022 to $38.06 on 12 October 2023 vs. a peak-to-trough decline of 25.4% for the S&P 500.
• The stock is yet to recover to its pre-Crisis high
• The highest the stock has reached since then is $51.89 on 8 September 2024 , and currently trades at $22.94

 
2020 Covid Pandemic

• CPB stock fell 23.1% from a high of $53.84 on 17 March 2020 to $41.41 on 25 March 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 2 December 2022

 
2008 Global Financial Crisis

• CPB stock fell 41.3% from a high of $42.39 on 20 February 2007 to $24.87 on 24 April 2009 vs. a peak-to-trough decline of 56.8% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 20 March 2013

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