Treehouse Foods Inc (THS, Financial), a leading private label manufacturer in the U.S., experienced a daily loss of -10.31% and a 3-month loss of -26.75%. The stock's diluted Loss Per Share stands at 1.35. Despite these figures, the question remains: Is Treehouse Foods (THS) modestly undervalued? This article aims to shed light on this question, providing a comprehensive valuation analysis of Treehouse Foods. We invite you to delve deeper into the financial health and intrinsic value of the company.
Company Overview
Treehouse Foods, the largest private label manufacturer in the U.S., was born out of a series of acquisitions, with the most notable being the 2016 acquisition of Ralcorp, Conagra's former private brands business. The firm operates in over 25 categories, including snacks, meals, and single-serve beverages. While retailers make up its most significant end-market, Treehouse Foods also serves foodservice customers, industrial clients, and branded consumer goods firms. With over 90% of its revenue coming from the U.S., the company's stock price currently stands at $38.12, with a market cap of $2.10 billion.
Deciphering the GF Value
The GF Value is a proprietary measure that represents the current intrinsic value of a stock. It's derived from historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. According to our calculations, Treehouse Foods (THS, Financial) is believed to be modestly undervalued. This implies that the long-term return of its stock is likely to be higher than its business growth.
Financial Strength Analysis
Investing in companies with poor financial strength carries a higher risk of permanent capital loss. Therefore, it's crucial to carefully review a company's financial strength before deciding to buy its stock. Looking at the cash-to-debt ratio and interest coverage can provide a good starting point for understanding a company's financial strength. Treehouse Foods has a cash-to-debt ratio of 0.01, which is worse than 95.73% of companies in the Consumer Packaged Goods industry. This indicates that the financial strength of Treehouse Foods is poor.
Profitability and Growth
Profitable companies, especially those demonstrating consistent profitability over the long term, pose less risk for investment. Treehouse Foods has been profitable 4 times over the past 10 years. Over the past twelve months, the company had a revenue of $3.60 billion and a Loss Per Share of $1.35. Its operating margin is 5.27%, ranking better than 53.15% of companies in the Consumer Packaged Goods industry. However, Treehouse Foods's 3-year average revenue growth rate is worse than 84.65% of companies in the industry, indicating poor profitability.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) and the weighted cost of capital (WACC) is another way to assess its profitability. For the past 12 months, Treehouse Foods's ROIC is 3.44, and its cost of capital is 4.77. This indicates that the company is not generating enough return on its invested capital.
Conclusion
In conclusion, Treehouse Foods (THS, Financial) is believed to be modestly undervalued. However, the company's financial condition is poor, and its profitability is questionable. Its growth ranks better than 56.44% of companies in the Consumer Packaged Goods industry. For more detailed financial information about Treehouse Foods, you can check out its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
