NEW YORK ( TheStreet) -- Invest long enough and you will come to find that certain companies just never come cheap, regardless of whatever economic conditions those companies face. To that end, Campbell Soup Co. (CPB - Get Report) fits this criteria for demonstrating that the Street is not as price-sensitive as those who typically shop for its products.
Although Campbell's stock, which has posted year-to-date gains of "only" 17%, lags behind
(HRL - Get Report)
, Campbell's price-to-earnings ratio of 33 is nine points higher than Hormel's. And it's four points higher than the industry average. Clearly, the Street still has hearty expectations for Campbell, even though the stock has shed roughly 15% in the past six months.
Even so, as with Hormel, which I also consider expensive, I don't believe it makes sense to bid up Campbell's shares while hoping that the Street has pegged this story correctly. But my issue is not just with Campbell's valuation.
I've seen from
, there is a
in the packaged food industry, which, until recently, had soured investors' portfolios. Unlike several peers, Campbell, whose first-quarter revenue declined 2% year-over-year, has brought nothing to this food fight. Not even a covered dish.
If you've been following this sector as long as I have, you'll realize that there is nothing analysts enjoy scrutinizing more than "organic growth," or the metric that measures a company's operational performance using only internal resources and excluding events like acquisitions.
As with, say,
, which has grown
primarily through acquisitions
, organic growth is something that Campbell has struggled to produce. And it seems things are getting worse.
After posting 1% organic growth in its fiscal fourth quarter ended in August, organic revenue declined 4% last quarter, a gross underperformance against Hormel and Kraft, two companies that trade at much lower multiples.
I appreciate that there were factors outside of management's control that contributed to the dismal results. These include retail inventory movements resulting from the Thanksgiving holiday arriving later than usual, due to the whims of the calendar. That was also the case for Kraft. And when ConAgra reports earnings in a few weeks, we should get a better sense of how real of an adversity the timing of Thanksgiving was.