Yesterday, Kraft Foods (KFT) provided an update on fiscal 2011 results. Operating EPS was guided to $2.28 or slightly above analysts estimates. Naturally the company got a lot of media attention.
What didn't get a lot of attention is that Kraft now trades at a rich multiple for a company with just 6.5% organic revenue growth. The forward PE (2012) is now over 15. A very rich price when the S&P500 trades at roughly 13x 2012 estimates.
Kraft is a solid company, but the PEG ratio sits at 1.7 with a 5 year growth rate just short of 10%. Also, the dividend yield has dropped to only 3.1% with the stock jumping from the low $30s at the start of October to nearly $39 today.
Is Kraft worth paying that much? That would be my major concern when investing in the stock.
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