Post has followed the market’s trajectory closely. The stock is down 9.6% to $97.18 per share over the past six months while the S&P 500 has lost 4.8%. This might have investors contemplating their next move.
Is there a buying opportunity in Post, or does it present a risk to your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.
Why Is Post Not Exciting?
Even though the stock has become cheaper, we're swiping left on Post for now. Here are three reasons why POST doesn't excite us 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 2.8% 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 This projection doesn't excite us and implies 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 isn’t a terrible business, but it doesn’t pass our bar. Following the recent decline, the stock trades at 12.9× forward P/E (or $97.18 per share). While this valuation is fair, 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 one of our top digital advertising picks.
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