J M Smucker Co (SJM) Is More Than Just a Jelly Company

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J M Smucker Co (NYSE:SJM) has come a long way since its humble beginnings. The once-famous jelly and jam maker has now expanded its business to cover over 50 brands across the U.S. and Canada. And it all started in 1897 in Orrville, OH by Jerome Monroe Smucker.

J M Smucker Co (SJM) Is More Than Just a Jelly CompanyJohnny Appleseed (aka John Chapman) had been across this part of the country planting apple seeds. Smucker took advantage and began selling apple butter across the region out of his wagon. Today, SJM has a market cap of $14 billion and one or more of its products is in every house in the nation.

The strength of SJM is in its roots. The company is founded upon the principle that making a quality product, selling it at a fair price and following sound practices will result in success. And for nearly 120 years it has proven to be true.

But in the first quarter of its fiscal year, Smucker’s revealed a kink in its armor, and SJM stock fell 18% in the past quarter. Its recent Q2 earnings report, too, was far from inspiring. Smucker’s, however, has said guidance remains unchanged for FY17 and all its targets remain in place, as is.

This kind of news did not help the stock, which before Q1 earnings was trading around $157 at a price-earnings ratio of 26. Once you start getting P/Es above 25, you can expect serious consequences when the company doesn’t deliver on earnings.

And this isn’t a tech firm. It sells pet food, coffee, peanut butter and jelly.

Granted in the past 15 years, SJM has grown the brands in its portfolio at a rapid clip, but this growth hardly puts this stock on par with Silicon Valley superstars. Most of the stores that sell its products have traded hands at around 15 times earnings, so you can’t expect an established company to amp up its growth much beyond expectations.

That’s why investors have sold SJM off over the past few months. Many now think the stock is reasonably valued here, having cut its premium in the past quarter. It now trades at a much more reasonable P/E of 20.

Bottom Line on SJM Stock

SJM is in a transition phase now, incorporating all the brands it has been purchasing into a cohesive business that will continue its growth long into the future. This isn’t the time to walk away from SJM, this is the time to get in, while its rebuilding for the next decade.

Plus, is you look from year to year rather than quarter to quarter, you see that SJM is up 11% in the past 12 months, and up 62% over the past 5 years. This is a stock to run toward, not away, from.

What’s more, SJM has grown its dividend for the past 19 consecutive years and the dividend only represents 50% of earnings. Right now, the dividend yield is around 3%, which is a respectable return, along with SJM’s growth kicker.

Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.

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Article printed from InvestorPlace Media, https://investorplace.com/2016/11/sjm-stock-smucker-buy/.

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