Kraft Heinz Company (KHC) – Sentiment negative, but is it that bad?

[NASDAQ: KHC]: One way to determine the worthiness of an investment is to gauge the market sentiment. That’s because, sentiment, especially institutional sentiment, is a good measure of demand and supply. Using this parameter, Kraft Heinz Company (KHC) has been given a negative review by analysts. The company has been rated negative as compared to other companies in the consumer goods sector. The net inflows of ETF’s into Kraft Heinz Company (KHC) has also slowed down. But with such bearish sentiment around Kraft Heinz Company, is it a stock worth holding?

 

Well, one important thing to note is the sentiment changes all the time. It is fluid and may change from one minute to the next. Besides, sentiment is highly speculative, and may sometimes be wrong.  As such focusing on the fundamentals offers a more credible long-term perspective on the direction that a company’s stock will take in the long-haul. Using this parameter, Kraft Heinz Company (KHC) has some solid fundamentals backing it up. One of them is its strong presence in the market. Kraft Heinz is the 3rd largest food and beverage company in the U.S, and the 5th largest in the world. It is a well-recognized brand in the market, which is a strong anchor to its sales in the long-run.

 

As such, the company’s market presence in the food and beverage market is pretty much guaranteed, on the basis of its strong brand name. In essence, though sentiment could be bearish in the short-term, Kraft Heinz Company’s long-term prospects are good. The company operates in an industry where capital and regulations are a major barrier to entry, which mean that its long-term sales are to a large extent guaranteed. This makes it a solid long-term bet, without considering short-term sentiment that may in no way be related to the company. The entire market is shaky at the moment due to macro-economic and geo-political issues that have no long-term bearing on the future of Kraft Heinz Company (KHC).



 

From a look at the company’s books, it is clear that this is a fundamentally strong company. One of the biggest fundamentals is its capacity to repay its debts without compromising on its capacity to remain solvent. The company has a current ratio of 1.0. This means that its revenues are good enough to service its debt of $32.38 billion.  The capacity to comfortably handle debts is important because it indicates that the company can survive an aggressive rates hike by the market.

 

On top of that, the company has a high levered free cash flow that stands at $3.13 billion. This means that after the company has met all its obligations, it has $3.13 billion left. This is important because it means that the company has the leeway to comfortably navigate any negative occurrences on the economy. It also means that the company has what it takes to keep investing in research and development in order to maintain its competitive edge in the market. It’s a stock worth keeping an eye on in the long-term.

SHARE
Previous articleThe Boeing Company (NYSE:BA) – A worthy stock as airline manufacturing consolidates
Next articleNextEra Energy Inc. (NYSE: NEE) – As Fed hikes rates, it’s time to pivot to low beta stocks