Hormel Foods has gotten torched over the last six months - since July 2025, its stock price has dropped 26.5% to $22.98 per share. This may have investors wondering how to approach the situation.
Is now the time to buy Hormel Foods, or should you be careful about including it in your portfolio? Get the full stock story straight from our expert analysts, it’s free.
Why Do We Think Hormel Foods Will Underperform?
Despite the more favorable entry price, we're swiping left on Hormel Foods for now. Here are three reasons we avoid HRL 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.
Hormel Foods’s average quarterly sales volumes have shrunk by 2.5% over the last two years. This decrease isn’t ideal because the quantity demanded for consumer staples products is typically stable.
2. Low Gross Margin Reveals Weak Structural Profitability
All else equal, we prefer higher gross margins because they usually indicate that a company sells more differentiated products, has a stronger brand, and commands pricing power.
Hormel Foods has bad unit economics for a consumer staples company, signaling it operates in a competitive market and lacks pricing power because its products can be substituted. As you can see below, it averaged a 16.4% gross margin over the last two years. That means Hormel Foods paid its suppliers a lot of money ($83.65 for every $100 in revenue) to run its business.
3. EPS Trending Down
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Sadly for Hormel Foods, its EPS declined by 9.2% annually over the last three years while its revenue was flat. This tells us the company struggled because its fixed cost base made it difficult to adjust to choppy demand.
Final Judgment
Hormel Foods falls short of our quality standards. After the recent drawdown, the stock trades at 15.3× forward P/E (or $22.98 per share). This multiple tells us a lot of good news is priced in - we think there are better stocks to buy right now. We’d recommend looking at the Amazon and PayPal of Latin America.
Stocks We Would Buy Instead of Hormel Foods
Check out the high-quality names we’ve flagged in our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
Stocks that have made our list include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.
