Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Has McCormick Become the Perfect Stock?

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

Every investor would love to stumble upon the perfect stock. But will you ever really find a stock that provides everything you could possibly want?

One thing's for sure: You'll never discover truly great investments unless you actively look for them. Let's discuss the ideal qualities of a perfect stock and then decide whether McCormick (NYSE: MKC  ) fits the bill.

The quest for perfection
Stocks that look great based on one factor may prove horrible elsewhere, making due diligence a crucial part of your investing research. The best stocks excel in many different areas, including these important factors:

  • Growth. Expanding businesses show healthy revenue growth. While past growth is no guarantee that revenue will keep rising, it's certainly a better sign than a stagnant top line.
  • Margins. Higher sales mean nothing if a company can't produce profits from them. Strong margins ensure that company can turn revenue into profit.
  • Balance sheet. At debt-laden companies, banks and bondholders compete with shareholders for management's attention. Companies with strong balance sheets don't have to worry about the distraction of debt.
  • Moneymaking opportunities. Return on equity helps measure how well a company is finding opportunities to turn its resources into profitable business endeavors.
  • Valuation. You can't afford to pay too much for even the best companies. By using normalized figures, you can see how a stock's simple earnings multiple fits into a longer-term context.
  • Dividends. For tangible proof of profits, a check to shareholders every three months can't be beat. Companies with solid dividends and strong commitments to increasing payouts treat shareholders well.

With those factors in mind, let's take a closer look at McCormick.


What We Want to See


Pass or Fail?


5-year annual revenue growth > 15%




1-year revenue growth > 12%




Gross margin > 35%




Net margin > 15%



Balance sheet

Debt to equity < 50%




Current ratio > 1.3




Return on equity > 15%




Normalized P/E < 20




Current yield > 2%




5-year dividend growth > 10%




Total score


3 out of 10

Source: S&P Capital IQ. Total score = number of passes.

Since we looked at McCormick last year, the company hasn't been able to regain the point it lost from 2011 to 2012. But the stock has spiced up many portfolios with a 25% gain over the past year.

McCormick is famous for its name-brand spices. But much of McCormick's revenue comes from less visible markets, such as its sales to institutional food companies. Fully 40% of its revenue in 2012 came from its industrial business, where PepsiCo (NYSE: PEP  ) and Yum! Brands (NYSE: YUM  ) rely on McCormick to provide flavoring for their respective food offerings.

Still, McCormick has been vulnerable to pressure from private-label spice brands. Although major customer Wal-Mart's (NYSE: WMT  ) test of private-label spices a few years ago hasn't hurt McCormick's revenue, the threat remains palpable throughout the industry. In response, McCormick has increasingly played a vital role in actually providing store-brand spices to grocery stores, sacrificing some margins to maintain its competitive moat.

In its most recent quarterly report, McCormick disappointed investors with somewhat weak earnings. Even though Motley Fool Inside Value analyst Joe Magyer argues that it's still expensive at current valuations, big drops in McCormick's stock don't happen very often, and the business still dependably produces ample free cash flow and a solid dividend that has risen every year for more than a quarter-century.

For McCormick to improve, it needs to find new avenues for faster growth and to do its best to shore up its margins. Combine that with some minimal work on its balance sheet, though, and it's clear that McCormick could rise up toward perfection fairly quickly with minimal effort.

Keep searching
No stock is a sure thing, but some stocks are a lot closer to perfect than others. By looking for the perfect stock, you'll go a long way toward improving your investing prowess and learning how to separate out the best investments from the rest.

As a major McCormick customer, PepsiCo's food business is just as important as its namesake beverage offerings. But some headwinds have made investors wonder whether more bland results lie ahead for PepsiCo. Find out in The Motley Fool's brand-new premium report on the company, where we guide you through everything you need to know about PepsiCo, including the key opportunities and threats facing the company's future. Simply click here now to claim your copy today.

Click here to add McCormick to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

Read/Post Comments (2) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 10, 2013, at 9:45 PM, NOTvuffett wrote:

    spice up your portfolio with mkc, lol.

  • Report this Comment On February 10, 2013, at 10:11 PM, wetmk1 wrote:

    MKC will never appeal to me. Cooking is a hobby with me so the only thing I know about mkc is that if I go to any 'ethnic' supermarket in NY and buy private label spices I will get six times the product for two times the price. MKC might be a great stock; I just can't get over my experience.

Add your comment.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2246585, ~/Articles/ArticleHandler.aspx, 9/25/2016 11:51:45 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 1 day ago Sponsored by:
DOW 18,261.45 -131.01 -0.71%
S&P 500 2,164.69 -12.49 -0.57%
NASD 5,305.75 -33.78 -0.63%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/23/2016 4:02 PM
MKC $96.71 Down -0.49 -0.50%
McCormick CAPS Rating: ****
PEP $107.34 Down -0.48 -0.45%
PepsiCo CAPS Rating: ****
WMT $72.35 Up +0.08 +0.11%
Wal-Mart Stores CAPS Rating: ***
YUM $90.64 Up +0.17 +0.19%
Yum! Brands CAPS Rating: ****