Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, confectionery company Tootsie Roll Industries (NYSE: TR ) has received the dreaded one-star ranking.
With that in mind, let's take a closer look at Tootsie Roll and see what CAPS investors are saying about the stock right now.
Tootsie Roll facts
| Headquarters (founded) |
Chicago (1896) |
| Market Cap |
$1.5 billion |
| Industry |
Confectioners |
| Trailing-12-Month Revenue |
$537.3 million |
| Management |
Chairman/CEO Melvin Gordon
President/COO Ellen Gordon |
| Return on Equity (average, past 3 years) |
7.6% |
| Cash/Debt |
$79.4 million / $7.5 million |
| Dividend Yield |
1.2% |
| Competitors |
Kraft Foods
Mars, Incorporated
Spangler Candy Company |
Sources: S&P Capital IQ and Motley Fool CAPS.
On CAPS, 39% of the 51 All-Star members who have rated Tootsie Roll believe the stock will underperform the S&P 500 going forward.
Just yesterday, one of those Fools, All-Star joryko, brought Tootsie Roll's seemingly unsustainable valuation to our community's attention:
This is getting a little bit ridiculous isn't it? Tootsie Roll Industries is currently trading at 33x earnings and 22x cash flow and is continuing to trade higher.
For comparison, Chipotle Mexican Grill (NYSE: CMG ) is trading at 35x earnings and 27x cash flow. The main difference between the two however, is that Chipotle burritos are an actual growth story; Tootsie Rolls are not anymore. [Tootsie Roll] has barely managed 2% revenue growth over the last five years while watching its EPS [fall]. Meanwhile Chipotle is pumping out top and bottom line growth of at least 20% each year.
In a very similar case to [Hershey Company] I believe that too much "safe money" has been put on these companies as investors are looking to find recession proof holdings with a nice little dividend yield. At the end of the day however, a little bubble will still pop sooner or later and I believe that is what we are looking at here.
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