As I suspected, Steven Mallas explained the key characteristics that make Wrigley
In fact, Steve pointed out that free cash flow is falling because of higher capital spending. He sees this as eventually leading to growth, while I pointed out in my opener that Wrigley is suffering from lower cash flow generation as competitors such as Hershey
On to valuation. Given the lofty earnings and free cash flow multiple, I'm not comfortable investing in Wrigley, given its inability to grow cash flow or margins over the past few years. In fact, I see better risk/return trade-offs in the two companies Steve mentioned that Berkshire Hathaway now owns: Motley Fool Inside Value recommendation Coca-Cola
Coke trades at less than 30 times trailing free cash flow, while mighty Procter & Gamble trades at closer to 20 times trailing free cash. And Anheuser-Busch
In any case, a comparison is useful because it demonstrates a valuation range that would make me comfortable owning Wrigley. Until its stock price contracts or its prospects improve, I'll continue to chew on other consumer goods companies for more favorable investment opportunities.
Wait! You're not done with this Duel. Go back and read the other arguments, then vote for a winner.
Wrigley is an Income Investor pick. Discover other dynamic dividend payers with a free 30-day trial. Anheuser-Busch and Coca-Cola are recommendations of Motley Fool Inside Value. Berkshire Hathaway is recommended in bothStock Advisor and Inside Value.
Fool contributor Ryan Fuhrmann has no financial interest in any company mentioned. Feel free to email him with feedback or to discuss any companies mentioned further. The Fool has an ironclad disclosure policy.