A Rose at the Wrong Price

This article originally appeared on RealMoney.com on Sept. 3, 2014 at 3:00 p.m. To read more content like this AND see inside Jim Cramer's multi-million dollar portfolio for FREE... Click Here NOW.

International Flavors and Fragrances  (IFF) is a very high-quality name. Its balance sheet is quite strong and the low-beta shares have performed extremely well since the start of the bull market.

Management just boosted the quarterly payout by 20.5%, taking it from $0.39 to $0.47. At Tuesday afternoon's quote of $101.30, IFF's current yield was 1.86%.

The stock's earnings per share (EPS) dipped slightly during 2008's recession but have risen in the year since then. Value Line expects $5.00 per share in 2014, which would be a new record high, up almost 12% from $4.47.

STOCKS TO BUY: TheStreet Quant Ratings and Dave Peltier's Stocks Under $10 has identified a handful of stocks that can potentially TRIPLE in the next 12 months. See them FREE today... Click Here NOW.

So, what's not to like? The company's valuation is simply too high.

During the four-year period from 2010 - 2013 IFF sold for a P/E of about 15.7x. The shares typically paid around 2.1% dividends. Tuesday's price reflects 20.2x the firm's 2014 estimate with a slightly sub-par 1.86% yield. Why buy now when IFF was avilable at better prices about 99% of the time since 2009?

Source: Value Line

Clearly there is room for this stock to fall, even if it avoids a full regression to its normalized multiple and yield. Independent analysis from Morningstar led them to a rare 2-star Sell rating. They feel fair value is only $88, about 13% below the present price.

If you liked this article you might like

Lockheed Martin, Raytheon, Activision Blizzard: 'Mad Money' Lightning Round

Shrug Off The Apple-FANG Bite: Cramer's 'Mad Money' Recap (Thur 9/14/17)

Trifecta Stocks: War of Words Heats Up as Economy Cools

International Flavors & Fragrances Is Looking IFF-y

Market Recon: The French Election Is out of the Way; the Focus Returns to Earnings