Kraft Heinz: Now Is The Time To Make A Move

10/12/17

Kraft Heinz (KHC) has disappointed the shareholders so far this year. The world's fifth largest food and beverage company has been silent after getting rejected by Unilever (UN) earlier this year. More importantly, Kraft Heinz has seen sales decline across the entire product portfolio during the first six months of 2017, except its frozen and chilled meals business. The stock has plunged nearly 20% from its February 17 peak, primarily due to weak organic sales performance and valuation concerns.

The market is currently valuing Kraft Heinz at a forward price to earnings multiple of approximately 20x, whereas the packaged foods stocks are trading at 17.2x multiple. Kraft Heinz is worth considering for the long-term gains at these valuation levels, as the management continues to invest in product innovation, aggressive marketing, and cost-cutting initiatives to generate value for the shareholders. Kraft Heinz has a robust portfolio and best-in-class profit margins, which means even modest revenue growth rates will magnify bottom-line. Furthermore, the timing is favorable for Kraft Heinz to make its next big move as most of the packaged food stocks are trading at attractive valuations.

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