What happens when you take a classic recipe and fine-tune it to suit the current trends and palate? The end result is that you gain market leadership in almost all the categories that you launch, because classics hardly disappear only their phase does. But if you keep innovating (or renovating in this case), twisting and adding a little zest to the concoction, then you have an all time winner in hand. This has been the story of Pinnacle Foods (NYSE:PF), which has set it apart from its peers Kraft Foods (NASDAQ:KRFT) and ConAgra Foods (NYSE:CAG)

Pinnacle, which IPO'd earlier this year, saw its shares rise by 29% in a short span of time; but its growth story has only started. With the economy still a little sluggish, consumers are looking toward value-for-money alternatives and there is a steady increase in the percentage of products sold on promotion, through mass merchandisers and the dollar store channel. The company is strategically poised in each of these divisions to benefit  from the changing trends.

Sumptuous times for Pinnacle ahead
Pinnacle Foods operates across three segments: Birds Eye Frozen, Duncan Hines Grocery and Specialty Foods. Statistically, the sales of Birds Eye Frozen products are higher during the winter months and the sales of the Duncan Hines segment, which offers baking mixes and frostings, naturally head north during Thanksgiving and Christmas. To add to that the company has come out with some limited edition seasonal products to provide varied baking possibilities to its consumers. So with the holiday season just around the corner one may be more than optimistic about the top-line growth of the company in the next quarterly report.

Moreover, the acquisition of Unilever's Wish-Bone was one of the best additions to the company's already diversified portfolio. The acquisition is expected to add another $65  million to the full year earnings before interest, tax, depreciation and amortization. The synergy was evident when the company revised and raised its quarterly dividend by 16.7% to $0.21 per share.

What about ConAgra and Kraft?

ConAgra in its recent earnings report reflected a top-line growth of 27% compared to the first quarter of fiscal 2013. But dig deeper and there are certain points worth noticing. We find that if we ignore $1 billion worth of revenue that came from Ralcorp group which the company acquired recently, its other segments do not have a very pleasant story to tell. Revenues from commercial food segment were flat whereas revenue from consumer foods segment went south by 2%. Again, the Ralcorp acquisition is hailed as expensive by many and the fact that ConAgra is unable to maintain (let aside grow) prior ownership period sales of the Ralcorp segment, has not helped its cause either.

When we look at Kraft it's a mixed story. Its third quarter sales have weakened further by 4.2% with the organic net revenue being down by 4.1%.The EPS guidance increased to around $3.58 but it had more to do with the market based impact of post-retirement benefit plans. More so, its spin-off into Mondelez has not benefited the company so far in any form. Though Kraft has lower operating margins when compared to its peers, it has greater numbers. Its operating profit was up 14.9% to $870 million and net earnings were about $500 million. So what it loses on the growth part, it somewhat makes up with a dividend payout of 75% and a dividend yield of 3.8%. Hence, if you have a low risk appetite and desire for regular returns this stock can suit you just fine.

The bottom line
Pinnacle Foods can be a stock for the long run due to more than one reason. Firstly, its already existing products have outclassed majority of others in their respective segments and still show signs of potential growth. Secondly, its quarterly results have been impressive since its inception on the exchange and it also has the lowest PEG ratio of 1.38 among its competitors. Lastly, the company is backed by the Blackstone group and a very experienced management who will make sure that this company reaches the summit. 
 
 

Fool contributor Rahul Baid has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.