Over the last six months, Post’s shares have sunk to $100.32, producing a disappointing 6.1% loss - a stark contrast to the S&P 500’s 11.1% gain. This may have investors wondering how to approach the situation.
Is now the time to buy Post, or should you be careful about including it in your portfolio? Get the full breakdown from our expert analysts, it’s free.
Why Is Post Not Exciting?
Even though the stock has become cheaper, we're sitting this one out for now. Here are three reasons we avoid POST 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.
Post’s average quarterly sales volumes have shrunk by 3% 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 Post’s revenue to rise by 3.4%, a deceleration versus This projection doesn't excite us and suggests its products will face some demand challenges.
3. Previous Growth Initiatives Haven’t Impressed
Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).
Post historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 5.7%, somewhat low compared to the best consumer staples companies that consistently pump out 20%+.
Final Judgment
Post’s business quality ultimately falls short of our standards. After the recent drawdown, the stock trades at 14.3× forward P/E (or $100.32 per share). While this valuation is reasonable, we don’t really see a big opportunity at the moment. We're fairly confident there are better investments elsewhere. We’d suggest looking at one of our all-time favorite software stocks.
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