TreeHouse Foods Inc. growing through acquisitions

Aug 25th, 2014 – Comment

The release of Q3 results is expected in November but the real driver in terms of THS will be acquisitions.


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Hi Lou,

Could you look at Treehouse Foods. They have grown a lot over the last 10 years. Don’t know if they are ready to be flipped.

Thanks,

Doug

 

Hey Doug,

Thanks for the assignment. competes in the private label and food services sectors as well as having some products distributed at retail. Over the last three years private label has been growing at twice the rate of branded products and is now a $100 billion  sector. Interestingly food service accounts for 50% of total food industry sales.

The operating units under the THS umbrella includes , , , , Cain’s Foods, and . The market capitalization of the company is $3.4 billion and it has grown through a series of acquisitions.  In May of 2014 the company’s Chief Financial Officer commented that THS had upped its borrowing capacity to take advantage of an attractive mergers and acquisitions environment. Two acquisitions have been completed since then.

An examination of the charts will help identify how best to proceed.

 

 

 

THS

The three-year chart depicts a stock that has enjoyed a profitable climb but not what would be called a smooth ride. The pullback from the high near $75.00 in late October 2013 to $62.50 in early February of 2014  broke below the 50 and 200-day moving averages. Moves like that put investors in a state of high anxiety deciding on a course of action. The selling was signalled by the MACD and the RSI as was the case in late June of 2014 as the shares retreated from a 52-week high at $83.19.

 

 

 

 

 

THS2

The six-month chart provides a close up of the bounce off the 200-day moving average in late July and the buy signalled by the MACD and the RSI. There is resistance that has formed at $81.00 that needs to be overcome if THS is going to break above the 52-week high and start a new leg up. At the present time the momentum indicators are not providing much guidance. The company doesn’t offer a dividend so your return comes in the form of a steady rise in the share price.

If you like this story you should establish a core position in the stock and add to it on pullbacks.

The release of Q3 results is expected in November but the real driver in terms of THS will be acquisitions. With two deals completed in the first seven months of the year the question becomes when the company will be ready to hit the market and go shopping.

Make it a profitable day and happy capitalism!

 

 

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