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Kraft's gross profit margin for the second quarter of its fiscal year 2012 is essentially unchanged when compared to the same period a year ago. Even though sales decreased, the net income has increased, representing an increase to the bottom line. Kraft has weak liquidity. Currently, the Quick Ratio is 0.70 which shows a lack of ability to cover short-term cash needs. The company's liquidity has increased from the same period last year, indicating improving cash flow.
During the same period, stockholders' equity ("net worth") has decreased by 7.32% from the same quarter last year. Overall, the key liquidity measurements indicate that the company is in a position in which financial difficulties could develop in the future.The current P/E ratio indicates a discount compared to an average of 23.19 for the Food Products industry and a premium compared to the S&P 500 average of 16.49. To use another comparison, its price-to-book ratio of 1.97 indicates a discount versus the S&P 500 average of 2.28 and a significant discount versus the industry average of 3.67. The current price-to-sales ratio is similar to the S&P 500 average, but it is below the industry average, indicating a discount. Upon assessment of these and other key valuation criteria, Kraft proves to trade at a discount to investment alternatives within the industry.
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