With shares of H.J Heinz Company (NYSE:HNZ) trading at around $57.22, is HNZ an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
C = Catalyst for the Stock’s Movement
A logical bear case could be made for Heinz at the moment, but anytime someone has made a bear case for Heinz in the past and acted on it, they have been left in the dust. The stock is up over 8700 percent since its IPO. This is a company that also has a great track record for paying generous dividends. Currently, the yield is at 3.50 percent. As far as the bear case goes, it relates to inflation. The 2012 drought won’t be felt inflation-wise until 2013. Bears feel that this will lead to a vicious cycle in which consumers will be more selective at the store, which will then lead to a revenue drop, and then a drop in the price of the stock. While there might be some truth to this potential scenario, it’s also a bit far-fetched. Keep in mind that Heinz sells food products on a global scale, and there wasn’t a global drought. Emerging markets present a nice growth opportunity for the company. In addition to that, Heinz is interested in making several strategic acquisitions in the near future, which means additional growth opportunities. If you’re more concerned with the present, Heinz has over $1 billion in operating cash flow, good margins, solid revenue growth, and a history of increasing dividends.
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Let’s take a look at some more important numbers.