Mondelez trades at $61.49 per share and has stayed right on track with the overall market, gaining 8.1% over the last six months. At the same time, the S&P 500 has returned 9.9%.
Is now the time to buy Mondelez, or should you be careful about including it in your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.
Why Is Mondelez Not Exciting?
We're cautious about Mondelez. Here are three reasons there are better opportunities than MDLZ and a stock we'd rather own.
1. Demand Slipping as Sales Volumes Decline
Revenue growth can be broken down into changes in price and volume (the number of units sold). While both are important, volume is the lifeblood of a successful staples business as there’s a ceiling to what consumers will pay for everyday goods; they can always trade down to non-branded products if the branded versions are too expensive.
Mondelez’s average quarterly sales volumes have shrunk by 1.5% over the last two years. This decrease isn’t ideal because the quantity demanded for consumer staples products is typically stable.
2. Projected Revenue Growth Is Slim
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect Mondelez’s revenue to rise by 2.5%. This projection doesn't excite us and suggests its products will face some demand challenges.
3. EPS Trending Down
Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.
Sadly for Mondelez, its EPS declined by 2% annually over the last three years while its revenue grew by 6.6%. This tells us the company became less profitable on a per-share basis as it expanded.
Final Judgment
Mondelez’s business quality ultimately falls short of our standards. That said, the stock currently trades at 19.3× forward P/E (or $61.49 per share). Investors with a higher risk tolerance might like the company, but we think the potential downside is too great. We're pretty confident there are more exciting stocks to buy at the moment. We’d suggest looking at the most entrenched endpoint security platform on the market.
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