We all know the story of the tortoise and the hare, right? The idea that slow and steady will ultimately win the race, even if it puts all of the spectators to sleep in the meanwhile. Well, if you're one of those patient, "I'll get rich slowly" types, you might want to prop open your eyelids and consider Campbell Soup
Yes, I know growth wasn't too exciting here in the company's fiscal second quarter (remember that whole tortoise/hare thing?). Net sales were up 3%, and adjusted earnings per share were up about 11% from last year's level. What growth that there was, at least at the operating level, was driven by the soup and sauces businesses both here and abroad. Baking/snacking and "other" (which includes Godiva chocolates) were both down a bit, though not by an alarming amount.
Growth may have been pokey, but we're talking about a company here that has been producing some very robust returns on invested capital while also cutting down its admittedly large debt burden. And yet, while the company has been steadily creating robust economic profits (that is, the difference between its return on capital and cost of capital), the stock really hasn't gone anywhere in five years.
Oh sure, there's competition. PepsiCo
The fly in the soup for me is the valuation. The stock trades a bit below my estimate of fair value, but not enough to fit within my margin of safety rules. And while buying at the right price is almost always important, I think it's even more so here. Sometimes you can pay a little too much for a growth company and get bailed out by that growth. In the case of Campbell, though, what you see is pretty much what you get, so I don't think you can count on frenetic growth to counteract paying too much.
For more Foolish food for thought:
Unilever and Kraft are Motley Fool Income Investor recommendations.
Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).