Since February 2025, Kellanova has been in a holding pattern, posting a small loss of 2.6% while floating around $80.07. The stock also fell short of the S&P 500’s 5.3% gain during that period.

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Why Is Kellanova Not Exciting?

We're sitting this one out for now. Here are three reasons why K 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.

Kellanova’s average quarterly sales volumes have shrunk by 1.5% over the last two years. This decrease isn’t ideal because the quantity demanded for consumer staples products is typically stable.

2. EPS Trending Down

Analyzing the change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.

Sadly for Kellanova, its EPS declined by 4.4% annually over the last three years, more than its revenue. This tells us the company struggled because its fixed cost base made it difficult to adjust to shrinking demand.

3. Free Cash Flow Margin Dropping

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

As you can see below, Kellanova’s margin dropped by 3.5 percentage points over the last year. If its declines continue, it could signal increasing investment needs and capital intensity. Kellanova’s free cash flow margin for the trailing 12 months was 5.1%.

Final Judgment

Kellanova’s business quality ultimately falls short of our standards. With its shares trailing the market in recent months, the stock trades at 21.2× forward P/E (or $80.07 per share). This valuation tells us it’s a bit of a market darling with a lot of good news priced in - we think other companies feature superior fundamentals at the moment. We’d recommend looking at an all-weather company that owns household favorite Taco Bell.

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