Post has been treading water for the past six months, recording a small loss of 3% while holding steady at $106.73. The stock also fell short of the S&P 500’s 7.7% gain during that period.
Is now the time to buy Post, or should you be careful about including it in your portfolio? Get the full stock story straight from our expert analysts, it’s free.
We don't have much confidence in Post. Here are three reasons why you should be careful with POST and a stock we'd rather own.
Why Is Post Not Exciting?
Founded in 1895, Post (NYSE:POST) is a packaged food company known for its namesake breakfast cereal and healthier-for-you snacks.
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 5.4% 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 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 Post’s revenue to stall, a deceleration versus its 16.7% annualized growth for the past three years. This projection doesn't excite us and indicates its products will face some demand challenges.
3. Previous Growth Initiatives Haven’t Paid Off Yet
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).
Post historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 6.1%, somewhat low compared to the best consumer staples companies that consistently pump out 20%+.
Final Judgment
Post isn’t a terrible business, but it isn’t one of our picks. With its shares lagging the market recently, the stock trades at 17.3× forward price-to-earnings (or $106.73 per share). Beauty is in the eye of the beholder, but our analysis shows the upside isn’t great compared to the potential downside. We're fairly confident there are better stocks to buy right now. We’d recommend looking at Wingstop, a fast-growing restaurant franchise with an A+ ranch dressing sauce.
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