Years ago, I worked for Star-Kist Foods when it was owned by H.J. Heinz (NYSE:HNZ). Heinz brings back fond memories, but as an investment, it's sorry, Charlie. Earnings are stuck in neutral, debt is on the rise, and a massive "transformation" has left the company expecting only slow sales growth.

Heinz has been divesting its slow-growing and less profitable brands. For example, in Dec. 2002, the company sold its Star-Kist tuna, 9Lives cat food, and Kibbles 'n Bits dog food brands, to name a few, to Del Monte Foods (NYSE:DLM) in a deal valued at $2.3 billion.

At the time, some speculated that Heinz was becoming window-dressing for giants like Kraft Foods (NYSE:KFT) and Unilever (NYSE:UN) to acquire. Well, that hasn't happened, but Heinz is focusing its U.S. businesses in the highly profitable ketchup, condiments and sauces, and frozen foods categories via the retail grocery and food service distribution channels.

So how fast is the current Heinz growing sales and profits? Revenue for the latest quarter rose 6.3% over the comparable year-ago period. Before saying, "That's not too bad," consider that acquisitions accounted for 5.4% of that rise. At its core, Heinz is still no jackrabbit.

The latest quarter's earnings per share rose 10.7%. Before you celebrate, notice that the effective tax rate fell from 32% to 24.8%, due to a favorable one-time tax ruling. Use adjusted operating income, and the gain is only 5.2%.

It's about the cash, right?
If my dueling opponent is sharp, and he is, he's going to claim that Heinz is all about free cash flow. But for the last six months, operating free cash flow (cash provided by operations minus capital expenditures) decreased 9% from the same period last year.

The company does pay a solid 3.4% dividend, but consider this: After paying out 57% of net income ($406 million over the past twelve months) for dividends, there isn't that much cash left for the company to make its acquisitions and pay down the net debt (total debt minus cash) of $5 billion. Oh, and debt-to-equity stands at a lofty 273%. Consider, too, that long-term debt has increased almost $1 billion, or 24%, over the past quarter. There's free cash flow, but the company is heaping on debt so it can grow.

What's that debt buying?
Heinz just paid $855 million for Groupe Danone's (NYSE:DA) HP Food business, which includes Lea & Perrins, HP sauces, and a license to market Amoy Asian sauces. Heinz sold solid, slow-but-steady growing brands to Del Monte for 1.3 times sales and 7.3 times earnings before interest, taxes, depreciation, and amortization (EBITDA). It purchased HP Foods for 3 times sales and 11 times EBITDA. Talk about selling low and buying high!

Other recent deals included Petrosoyuz, a Russian company that is No. 1 in mayonnaise and spreads/margarines and first runner-up in ketchup, and Nancy's Specialty Foods, a producer of premium appetizers, quiche entrees, and desserts. Too bad no financial details were released, or we might be able to analyze these purchases. Their impact on the balance sheet is obvious, though. The company's debt is mounting because it's buying assets faster than it's booking cash.

The bottom line
In August, at the annual shareholders meeting, Heinz said: "As we look out over the next three years, we are aiming for average annual sales growth of 3% to 4%, and EPS growth of 6% to 8%, excluding any divestitures or one-off events. This would represent excellent performance in our industry."

Excellent performance or not, you would be paying 16.8 times trailing earnings to buy a company analysts expect to grow earnings 7% annually for the next five years. That's a very rich premium. Consider Motley Fool Hidden Gems recommendation Fresh Del Monte Produce (NYSE:FDP). It sells for 10.9 times trailing earnings, is expected to grow earnings 9% annually, has a total-debt-to-equity ratio of 25%, and sports a 3% dividend (and a low 34% payout ratio).

H.J. Heinz is close to its 52-week low for a reason. Its stock isn't cheap because of its growth rate. The company continues to pile on debt and sell its assets cheaper on an EBITDA basis than its asset purchases. Sorry, Charlie, but there are better investment alternatives, even in the food business.

Heinz, Unilever, and Kraft Foods are Motley Fool Income Investor selections.

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Fool contributor W.D. Crotty does not own any shares in the companies mentioned. Click here to see the Motley Fool's disclosure policy.