Flowers Foods, Inc. (NYSE:FLO) and Hostess Brands, Inc. (NYSE:TWNK) are both Consumer Goods companies that recently hit new low. Many investors are wondering what to do with these names trading at such extreme levels. To determine if one is a better investment than the other, we will compare the two across growth, profitability, risk, return, dividends, and valuation measures.
Flowers Foods, Inc. (NYSE:FLO) operates in the Processed & Packaged Goods segment of the Consumer Goods sector. The company has grown sales at a 7.20% annual rate over the past five years, putting it in the medium growth category. FLO has a net profit margin of 4.00% and is more profitable than the average company in the Processed & Packaged Goods industry. In terms of efficiency, FLO has an asset turnover ratio of 1.51. This figure represents the amount of revenue a company generates per dollar of assets. FLO’s financial leverage ratio is 1.25, which indicates that the company’s asset base is primarily funded by equity capital. Company’s return on equity, which is really just the product of the company’s profit margin, asset turnover, and financial leverage ratios, is 12.90%, which is worse than the Processed & Packaged Goods industry average ROE.
Flowers Foods, Inc. (FLO) pays out an annual dividend of 0.68 per share. At the current valuation, this equates to a dividend yield of 3.26%. The company has a payout ratio of 106.70%. FLO’s current dividend therefore should be sustainable. Stock’s free cash flow yield, which represents the amount of cash available to investors before dividends, expressed as a percentage of the stock price, is 0.58. All else equal, companies with higher FCF yields are viewed as cheaper. Company trades at a P/E ratio of 29.30, and is more expensive than the average stock in the Processed & Packaged Goods industry. The average investment recommendation for FLO, taken from a group of Wall Street Analysts, is 2.40, or a buy.
Over the past three months, Flowers Foods, Inc. insiders have been net buyers, dumping a net of -210,830 shares. This implies that insiders have been feeling relatively bearish about the outlook for FLO. Insider activity and sentiment signals are important to monitor because they can shed light on how “risky” a stock is perceived to be at it’s current valuation. Knowing this, it makes sense to look at beta, a measure of market risk. FLO has a beta of 0.76 and therefore an below average level of market volatility.
Hostess Brands, Inc. (NASDAQ:TWNK) operates in the Processed & Packaged Goods segment of the Consumer Goods sector.
The average analyst recommendation for TWNK is 2.10, or a buy.
Hostess Brands, Inc. insiders have sold a net of -2,598,376 shares during the past three months, which implies that the company’s top executives have been feeling bearish about the stock’s outlook.
Flowers Foods, Inc. (NYSE:FLO) scores higher than Hostess Brands, Inc. (NASDAQ:TWNK) on 7 of the 13 measures compared between the two companies. FLO has the better fundamentals, scoring higher on growth, profitability, efficiency and return metrics. FLO has better insider activity and sentiment signals.