|Back to main|
1/11/2013 10:48:00 PM
Few stocks can matchB&G Foods ( BGS ) as an income stock that also has strong fundamentals.
IBD ran a screen with these factors: an annualized dividend yield of at least 3.5%; a Composite Rating of 95 or better; a best-possible A in Sales + Profit Margins + Return on equity; an up-down volume ratio of at least 1.1; and daily trading volume of at least 350,000 shares daily.
New Jersey-based B&G Foods makes shelf-stable food products and household products, such as Cream of Wheat, Ortega salsa and taco shells, Regina vinegars and Static Guard.
Earnings growth in the past three quarters on a year-ago basis has been strong -- 30%, 27% and in Q3, 40%. Revenue grew 20%, 15% and 16% in the same periods.
The Street expects EPS growth to be 30% in Q4 on a 20% pop in sales.
The company has benefited from a November 2011 acquisition fromUnilever ( UL ) of brands that included Mrs. Dash, Sugar Twin, Baker's Joy, Molly McButter, Static Guard and Kleen Guard.
The November 2011 acquisition contributed $20.2 million of the $21.2 million revenue increase for the third quarter.
On the chart, B&G Foods is currently shaping a second-stage pattern. The stock recently cleared resistance around 31.05, which could serve as an entry for an aggressive investor.
Volume was 59% above average.
The stock is lingering near this alternative buy point.
There are risks associated with B&G Foods.
Commodity prices -- such as those for agricultural products, meat and poultry -- could hurt margins, should inflation develop. B&G tries to lock in long-term contracts for protection.
The company's debt to equity ratio is 302%, which as the company says in its 10-K, "could restrict our ability to pay dividends."
B&G Foods also has some concentration risks. In 2011,Wal-Mart Stores (WMT) accounted for almost 18% of net sales.