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Treehouse Foods Inc THS

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Stock XNYS Rating as of
$36.00 −0.70 (1.92%)
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As of Cboe BZX Real-Time Price Open
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Company Report

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TreeHouse Foods: Reinitiating Coverage With No-Moat Rating; Shares Fairly Valued

Kristoffer Inton

We’re reinitiating coverage of private-label food producer TreeHouse Foods, with a fair value estimate of $34 per share and a no-moat rating. Our valuation implies about 7.5 times enterprise value/adjusted EBITDA and 33 times price/adjusted earnings off our 2024 estimates. We think shares are fairly valued. For packaged-food exposure, narrow-moat General Mills looks undervalued, at a 13% discount to our valuation.

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Price vs Fair Value

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THS is trading at a 8% premium.
Price
$36.69
Fair Value
$81.00
Uncertainty
High
1-Star Price
$66.30
5-Star Price
$34.10
Economic Moat
Vrtkh
Capital Allocation
Rbbmrbnk

Bulls Say, Bears Say

Bulls

The continued store expansion of grocers with high private-brand penetration like Trader Joe’s, Costco, and Aldi should provide a tailwind for industry growth.

Bears

With just one third of sales coming from multiyear contracts and the lack of switching costs in the industry, TreeHouse faces significant potential volatility to the top line.

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Trading Information

Previous Close Price
$36.70
Day Range
$35.91–37.04
52-Week Range
$34.79–54.70
Bid/Ask
$35.99 / $36.01
Market Cap
$1.94 Bil
Volume/Avg
137,820 / 564,483

Key Statistics

Price/Earnings (Normalized)
15.06
Price/Sales
0.60
Dividend Yield (Trailing)
—
Dividend Yield (Forward)
—
Total Yield
5.05%

Company Profile

TreeHouse Foods is the largest pure-play private-label manufacturer in the US. Much larger in the past following the 2016 acquisition of Ralcorp, Conagra’s former private-label business, the company has since divested several businesses to focus on high-growth categories. At present, the company produces and sells snacks (crackers, pretzels, cookies, and so on), beverages and drink mixes (such as nondairy creamer, coffee, tea), and a select number of grocery products (pickles, refrigerated dough, hot cereal, cheese, and pudding). Its most important sales channel is through retail grocery stores that sell its products under their own brands, with co-manufacturing and food away from home as much smaller channels of distribution for its fare.
Sector
Consumer Defensive
Industry
Packaged Foods
Stock Style Box
Small Core
Total Number of Employees
7,400
Website
https://www.treehousefoods.com

Competitors

Valuation

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Metric
THS
CAG
GIS
Price/Earnings (Normalized)
 15.0611.6715.47
Price/Book Value
 1.191.634.28
Price/Sales
 0.601.242.08
Price/Cash Flow
 8.598.1012.84
Price/Earnings
THS
CAG
GIS

Financial Strength

Metric
THS
CAG
GIS
Quick Ratio
 0.700.290.33
Current Ratio
 1.500.950.66
Interest Coverage
 1.583.357.70
Quick Ratio
THS
CAG
GIS

Profitability

Metric
THS
CAG
GIS
Return on Assets (Normalized)
 3.27%5.79%8.71%
Return on Equity (Normalized)
 8.20%14.39%27.32%
Return on Invested Capital (Normalized)
 4.88%8.83%13.78%
Return on Assets
THS
CAG
GIS
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Packaged Foods Industry Comparables

Screen in Investor
Ticker
Name
Morningstar Rating for Stocks
Capital Allocation
Economic Moat
Market Cap
NSRGY
Nestle SA ADRZltrwtvhrRnsvf$270.9 Bil
KHC
The Kraft Heinz CoVxhjfvsLpn$46.4 Bil
DANOY
Danone SA ADRZkfhyqfQnkhsp$40.8 Bil
GIS
General Mills IncMsmfhxryXrsmlb$39.0 Bil
MKC
McCormick & Co Inc Registered Shs Non VtgZjlypchprVmwp$20.4 Bil
K
Kellanova CoGcnbzhrTkbxwg$20.1 Bil
HRL
Hormel Foods CorpHlcrxnqmnJqmnxxw$19.5 Bil
CAG
Conagra Brands IncTtdgvcnrcVxsvk$15.1 Bil
CPB
Campbell Soup CoDxqbzjbnnLhbxs$13.6 Bil
SJM
JM Smucker CoMglLlty$12.5 Bil

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