Earnings drive stock prices. Analysts expect baby formula giant Mead Johnson Nutrition (NYSE:MJN) to grow its earnings per share 11% annually over the next five years. Since its IPO, in February 2009, its stock is up about 177% as of Monday. Even with the recent selloffs in the broader market, the company’s stock price is near a 52-week high and all the stars seem in alignment for the company’s further spinoff from Bristol-Myers Squibb (NYSE:BMY). Despite the good news, though, I believe Mead Johnson is bound for a fall. Here are my reasons why.

Earnings

Let’s get right to the significant part: Mead Johnson’s second-quarter results were exceptional, with sales increasing 22% to $932 million. Earnings per share were 72 cents, 4% higher than in the same quarter a year earlier. A lion’s share of the sales increase was due to volume, a sign the company’s products are doing well in all markets. Due to higher input costs, management expects full-year EPS between $2.70 and $2.75 a share. The consensus estimate is $2.73. Using the consensus, estimated EPS in 2016 are $4.60, which is a forward P/E of 15. That’s not bad until you consider that the trailing 12-month P/E ratio of the S&P 500 is 13.4, a 21-year low. Unless the world completely falls apart, it’s safe to assume the index’s forward P/E for 2016 is substantially higher than 15, suggesting it might be better to own the index rather than Mead Johnson.

Dividend yield

Currently, it’s $1.04 a year, or 1.5%. For a middle-of-the-road yield, investors are willing to pay 16.1 times pretax earnings. This tells me they care little about the dividend and believe there’s more capital appreciation available. That might be the case, but more than halfway into its third consecutive year of gains, the second quarter delivered just 4% earnings growth, not the 11% analysts are expecting over the next five years. If it continues to grow the top-line double-digits but not those at the bottom, its stock price will fall like a stone. Given that Mead Johnson’s product is always in demand, if the dividend was over $2, it would be a different story. However, it’s nowhere near that.

I’ve listed Mead Johnson Nutrition’s main competitors in the table above. What should immediately jump out at you is the separation between the company and its peers. In the economic and market turmoil that exists presently, I would think investors would want to take shelter within larger-cap companies possessing diversified revenue streams. Mead Johnson Nutrition definitely isn’t one of those companies. Groupe Danone (PINK:DANOY) and Nestle both are. In Nestle’s first quarter, its nutrition business, which accounts for slightly less than 10% of revenue, achieved organic growth of 8.9%. More important, its infant nutrition business grew by double-digits. In 2010, Nestle paid an annual dividend equivalent to $2.44 a share. Mead Johnson Nutrition might be a leader among its competitors in its particular product category, but overall in Nestle, you’re getting a stronger business with a higher dividend. Why put your capital at risk unnecessarily?

Bottom line

Mead Johnson Nutrition has been on a great run since its spinoff 29 months ago. There’s no denying its business is growing. I just think that with all the market volatility right now, hanging on to its stock is a very unhealthy decision.