BUY (more) CAG @ $33.39 & Bonus Screening/Valuation Formula

Buying (more) CAG @ $33.39

Adding 2%

4% position

After more watching CAG and analyzing some financials and thinking, I've decided to buy another slug of this position. 

ConAgra is a major food packager/producer that we all know and love. Their major brands include SlimJim, Gardein, Vlasic, Duncan Hines, Birds Eye, and more!

The stock trades at 12.6x next year's earnings - which is an 8% earnings yield. That's a pretty solid return if earnings never grow - but they will.

Additionally, CAG pays a 3.7% yield - which means the payout ratio is under 50% of earnings. A very sustainable and safe level.

One way that I simply value stocks is looking at their earnings yield, payout ratio, and GDP growth. Basically, find an adjusted growth rate and add it to earnings yield. Here's how that works for ConAgra:

Earnings Yield: 8.0%

Payout Ratio: 46.8%

Long-Term GDP Growth: 3.5%

Payout-Adjusted Growth: 3.5% x (1 - 46.8%) = 1.9%

Total Return (Long-Term): 8.0% + 1.9% = 9.9%

As compared to the S&P 500:

Earnings Yield: 4.7%

Payout Ratio: 29.6%

Long-Term GDP Growth: 3.5% 

Payout-Adjusted Growth: 2.5%

Total Return (Long-Term): 7.1%

So I'm saying I can get a better return from CAG as compared to the S&P 500 - thus, it's a buy at this level.

I'd love your feedback on this quick & easy way of looking at stock return potential. I used to adjust it for leverage (risk), but don't have access to that data as easily anymore. This is a decent 1st screen at looking for cheap stocks. 

Also, it's a quick way to compare the current S&P return potential to historical - and signal times when a selloff could be due...like today.