A Consumer Goods Growth Stock (THS)

During its five years of existence, this company's stock has risen 148 percent, while the iShares Dow Jones U.S. Consumer Goods Sector Index Fund (IYK) - of which it is a member - has risen just 6.3 percent.

That outperformance, from a typically slow growth sector, is worth taking a closer look at.

You're more than likely familiar with this company's products, if not its name. The company is TreeHouse Foods THS. Last year, TreeHouse saw its share price rise 32 percent.

In 2009, TreeHouse Food's stock returned investors a healthy 43 percent.

Based in Illinois, TreeHouse Foods says that in the United States it sells more than half of the non-dairy coffee creamer (Cremora and private labels), a third of the pickle products, and nearly one-quarter of all salad dressings - not to mention one-fifth of all canned soups. It also believes that it's both the U.S.'s and Canada's largest producer of private label salad dressings, drink mixes, and instant hot cereals.

These aren't exactly exciting products, but we don't look to consumer staples stocks for excitement. We look to them for consistent gains, and 75 percent over two years is pretty darn good.

While shopping for groceries most people seek out the best value without sacrificing quality. During the recession, many Americans turned to the store brands offered at Kroger (NYSE: KR), Wal-Mart Stores WMT and Safeway (NYSE: SWY), as a cost-saving alternative to the national names.

This was a boom for TreeHouse, since it provides private label products to retailers to resell under their own brand names.

Many shoppers are still skipping past better known offerings from Kraft Foods KFT, Campbell Soup Co. CPB or Ralcorp Holdings RAH, to give the house brands a try ‑ and often they've found them to their liking, especially from the savings aspect.

***TreeHouse Foods, with a market cap of $1.82 billion (2010 net sales were about the same), has been running with the big boys. Its largest customer is Wal-Mart Stores, accounting for 18.5 percent of its annual sales in 2010. The company was created in 2005, as a spin-off by dairy giant Dean Foods DF to shareholders of its specialty foods business.

Now, as the economic recovery solidifies I'm betting that many consumers won't quickly jump back on board the brand name train - rather they'll stick to their more generic, and value oriented products.

TreeHouse Foods made two strategic acquisitions in 2010, spending $665 million on Sturm, a maker of private label hot cereal and soft drink mixes, and $180 million for S.T. Foods, which manufactures private label macaroni-and-cheese and other dinner products. As it digests those deals, TreeHouse is carrying debt approaching $1 billion.

Earnings per share in 2010 grew slightly over 2009, $2.51 vs. $2.48. From 2008 to 2009, by comparison, EPS more than tripled.

***In the current quarter the consensus estimate from Thomson Reuters calls for a 23 percent increase in revenue and a 13 percent rise in earnings per share, to $0.66. I consider TreeHouse Foods a nice growth play in a value sector.

I constantly seek out stocks that are undervalued, and the gains that TreeHouse Foods posted reaffirm for me that small cap stocks ALWAYS outperform coming out of a recession. Click here to learn more about this exciting class of stocks.