Seeking Alpha: Not Exactly Cheap, Post Holdings Still Has Some Appeal

Cheap stocks aren't always (or even necessarily "often") the best performers, and vice versa. I think that's worth remembering when looking at Post Holdings (POST). Whether looking at EV/EBITDA, EV/revenue, ROE/PBV, or a discounted cash flow model, Post just doesn't seem very cheap and the stock has definitely been a strong performer in a sector that has weakened some in recent months.

I won't be surprised, though, if Post continues to stay fairly popular with the Street. Free of Ralcorp (now part of ConAgra (CAG)), Post is emerging from a prolonged period of benign neglect and management has already shown its willingness to leverage the balance sheet to grow and diversify the business. Competition from Kellogg (K), General Mills (GIS), and ConAgra, not to mention private labels, should not be ignored, but I believe that Post is likely to post growth rates on the upper end of the sector range, and I would expect that the Street will show its usual price insensitivity in the pursuit of that growth.

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Not Exactly Cheap, Post Holdings Still Has Some Appeal

Investopedia: Kellogg Reports Unimpressive Earnings

While the bull market in consumer stocks has slowed a bit over the past quarter, and Kellogg's (NYSE:K) performance has trailed others like General Mills (NYSE:GIS) and Post (Nasdaq:POST), the stock was still trading quite close to its 52-week high prior to its second quarter report. Unfortunately for shareholders, organic growth came in pretty weak. While the second half should be stronger from a margin perspective, a high valuation and less impressive growth trajectory could put these shares on ice for a couple of quarters.

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Investopedia: General Mills Third Quarter Earnings

When Heinz (NYSE:HNZ) drew a premium-priced buyout bid from 3G Capital and Berkshire Hathaway (NYSE:BRK.A, BRK.B), investors got giddy about revaluing the entire packaged food sector. Unfortunately, that looks a bit indiscriminate when it comes to General Mills (NYSE:GIS). While this isn't a bad business per se, nor is it one where a buyer couldn't find some room for improvement - it doesn't have the same sort of brands, market share or international profile. General Mills' fiscal third quarter earnings weren't bad, but the shares are trading in excess of fair value today and don't look like a great holding at these prices.

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Investopedia: Kellogg Looking Like A Better Part Of A Complete Portfolio

While I'm usually more than willing to grill underperforming company executives, I do have some pity for Kellogg (NYSE:K) CEO John Bryant. Not yet two years on the job, Mr. Bryant's role has more resembled that of an overworked fireman than a Fortune 500 CEO. Still, conditions seem to be stabilizing, and I am curious to see what sort of innovation and evolution he can shepherd at this giant food company.

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