Campbell Soup (NYSE: CPB) may have burned its tongue on its recent third-quarter results, but there's still a chance that shareholders might eventually find the company mmm-mmm good.

Income matters
In Q3, the company reported an 11% jump in profits, but its U.S. soup sales fell for a fourth consecutive quarter, leading to flat top-line growth. That's certainly worrisome for a company with "soup" in its name. As a result, the company predicted sales would fall 1% to 3% from last year's levels.

Revenues have stayed flat over the last 12 months, easing 0.7%, mainly because of increased competition and a general decline in demand for soups. Over a five-year period, revenue's grown a somewhat respectable 2%. Over the last four quarters, net margins fell slightly to 10.7%, from 11.1% in fiscal 2006.

In happier news, the company's baking and snacking segment enjoyed 10% sales growth during the third quarter. Campbell's return on equity also stands at an impressive 75.8%, far exceeding peers ConAgra (NYSE: CAG) and General Mills's (NYSE: GIS) respective ROEs of 17.9% and 26.2%.

Return on equity is an important measure for evaluating a company's profitability, since it shows how effectively a business is using shareholders' money. Evidently, Campbell has managed to remain efficient despite its declining sales.

Cash flow and debt
Although debt-to-equity ratio has zoomed to 290% from 181.7% in 2006, that owes largely to a decline in the company's equity resulting from a massive repurchase program—which partly explains the high ROE. Campbell has turned into a more levered company, which is fine, presuming your business is reliable enough, and you know how to take advantage of shifting credit obligations.

Fortunately, Campbell's interest coverage ratio stands at a high 10.8, and it enjoys consistently positive free cash flow, which totaled $785 million in the last four quarters. This leaves the company reasonably well-placed to proceed with its planned initiatives, regardless of the leveraged nature of the business.

Considering the slightly sluggish performance of its U.S. soup segment, Campbell is trading more or less at par with its peers. Its forward P/E stands at 13.8, equal to that of General Mills, but higher than ConAgra's 13.5. I think that's a reasonably fair price to pay for this stock, given its brands, tidy dividend, reliable cash flow, and growth potential. Keeping in mind the company's efforts to improve U.S. sales, Foolish investors might want to consider taking a cautious sip of this particular bowl of soup.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.