NEW YORK (TheStreet) -- With year-to-date stock gains of just 2.01%, Campbell Soup (CPB) investors have had an insatiable appetite for more profits.

Known for Pepperidge Farm snacks, Spaghettios and V8 products, Campbell Soup stock has trailed both the Dow Jones Industrial Average and the S&P 500, which have posted gains this year of 7.7% and 11.47%, respectively. But as the curtain drops on the year, Campbell Soup is looking for a resurgence, and with plans in place to increase margins in 2015, now is the time to warm up to one of the forgotten names in the packaged-foods industry.

Campbell Soup, which pays a strong yield of 2.80% and has purchased about 25% of its outstanding shares in the past 10 years, is a solid defensive play in a market that is always waiting for a pullback. Add the positive effect of higher grocery spending as consumers save more at the pump due to lower oil prices, and buying Campbell Soup stock makes a lot of sense.

Take a look at the chart below:

When compared with rival food companies such as General Mills (GIS) , Kellogg (K) and Mondelez (MDLZ) Campbell Soup shares have followed a similar pattern, supporting an argument that struggling with weak volumes and compressed margins has affected the entire industry.

And with shares down 3.73% over the past six months, Campbell Soup has become cheap.

The valuation story has changed.

In the past three months, the trailing price-to-earnings ratio has dropped to 17 from about 26 or more than 4 points lower than the average P/E ratio of companies in the S&P 500, according to CNN Money.

In fact, Campbell Soup's P/E ratio is 2 points lower than General Mills and is about half that of Mondelez, which has a P/E ratio of 36.4.

On a forward-looking basis, as shown in the chart below, only Kellogg is cheaper among the four companies. And even then, the difference is negligible by 0.60 points.

In addition, in terms of operational performance, Campbell Soup just reported some of the better results that investors have seen in this sector in several quarters, posting year-over-year revenue growth of 4.16%. By contrast, General Mills, Kellogg and Mondelez posted year-over-year revenue declines of 2.39%, 2.07% and 1.59%, respectively.

Nevertheless, Campbell Soup isn't perfect. Although President and Chief Executive Denise Morrison has done a good job addressing organic-growth challenges and diversifying the company's product portfolio via recent acquisitions, Campbell Soup has been unable to escape the flat revenue range that it has been in over the past decade.

And the company's fiscal 2015 year-over-year revenue growth projection of 2%, while better than zero growth, is nothing to write home about. Likewise, adjusted earnings-per-share projections in the range of $2.42 to $2.50 is down from the prior range of $2.45 to $2.50.

Campbell Soup Senior Vice President and Chief Financial Officer Anthony DiSilvestro cited currency headwinds and cost inflation as reason for the reduction.

The company, however, has begun to see increased demand within its portfolio of brands, including Bolthouse Farms, Kelsen and Plum.

And Morrison said that the company is making progress to strengthen the core business and expand into faster-growing areas.

There will be execution risks such as high commodity and supply chain costs, which may pressure gross margins. To the extent that Campbell Soup can trim operating expenses in areas such as marketing and general administrative costs, the company should be able to offset these margin pressures.

At the time of publication, the author held no position in any of the stocks mentioned.

Follow @Richard_WSPB

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.


TheStreet Ratings team rates CAMPBELL SOUP CO as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:

"We rate CAMPBELL SOUP CO (CPB) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, impressive record of earnings per share growth, compelling growth in net income and good cash flow from operations. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."

You can view the full analysis from the report here: CPB Ratings Report

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