J. M. Smucker currently trades at $116.01 per share and has shown little upside over the past six months, posting a small loss of 1.9%. However, the stock is beating the S&P 500’s 7.3% decline during that period.

Is now the time to buy J. M. Smucker, 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.

Despite the relative momentum, we're cautious about J. M. Smucker. Here are three reasons why we avoid SJM and a stock we'd rather own.

Why Is J. M. Smucker Not Exciting?

Best known for its fruit jams and spreads, J.M Smucker (NYSE:SJM) is a packaged foods company whose products span from peanut butter and coffee to pet food.

1. Long-Term Revenue Growth Disappoints

A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Unfortunately, J. M. Smucker’s 3.7% annualized revenue growth over the last three years was sluggish. This was below our standard for the consumer staples sector.

2. Projected Revenue Growth Shows Limited Upside

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 J. M. Smucker’s revenue to stall, a slight deceleration versus its 3.7% annualized growth for the past three years. This projection is underwhelming and suggests its products will see some demand headwinds.

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? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

J. M. Smucker historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 4.1%, lower than the typical cost of capital (how much it costs to raise money) for consumer staples companies.

Final Judgment

J. M. Smucker isn’t a terrible business, but it doesn’t pass our bar. Following its recent outperformance in a weaker market environment, the stock trades at 11.4× forward price-to-earnings (or $116.01 per share). While this valuation is reasonable, we don’t really see a big opportunity at the moment. We're pretty confident there are superior stocks to buy right now. We’d recommend looking at one of our top digital advertising picks.

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