Have any of you taken a recent look at Campbell Soup Company (CPB) lately? Don't.
About a month back, Goldman Sachs placed a sell rating on this name. It would be nice to blame Goldman, but this stock has been in a steady decline for almost a year and a half now. Year to date performance has simply been dreadful. The firm reports tomorrow morning. The industry is looking for 61 cents a share on revenue of roughly $2.14 billion. That revenue number would be down sequentially, but up year over year.
The firm looks to this casual observer to be in an awful position. Debt dwarfs cash on hand. Current and Quick ratios (are really, really low, implying a potential inability to meet short term obligation) appear to be something out of a monster movie. The three year sales growth rate comes to a whopping -2%.
There are three statistics that do stand out as positive. The dividend yield stands at 3.6%. The stock trades at a forward looking valuation of just 12 times. Lastly, 13% of the entire float is still short, meaning that if the company can tell you a good story tomorrow, the potential exists for a serious price moving short squeeze.
I think the Pitchfork pretty much tells the whole story here. I went into this analysis preparing to get myself involved. i just talked myself out of it. The stock will indeed likely move on Friday. The safe play would be a limited directional shot, such as a Bull Call or Bear Put Spread. I do not see the potential for great profitability on a short term spread. Nor am I able to make an instinctual call on direction. That said, I'm going to make like Johnny Unitas and pass.
On Campbell Soup, my trade idea is just don't.
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