This Acquisition-Hungry Company Just Hit Our Best Stocks to Buy List

Conagra Brands Inc. (NYSE: CAG) is about to announce a takeover of Pinnacle Foods Inc. (NYSE: PF), and it's laying the groundwork for the company's lucrative modernization plan...

In fact, RBC Capital Markets just upgraded the stock in the wake of the news of the acquisition, giving CAG a target price of $46 for a potential gain of 33% from today's share price of $34.64.

FoodAcquisitions are going to be a key driver of CAG's future growth.

Conagra has a clearly defined plan to spend money on acquisitions to diversify its brand, attract health-conscious consumers, increase top-line growth, and help widen its margins.

And the company's acquisition of Pinnacle Foods is a sign Conagra is ambitiously pursuing this plan.

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The deal will make Conagra the second-largest frozen food company in the United States, behind only industry giant Nestlé S.A.

And that's just one reason to own CAG stock...

Why Conagra Stock Is One of the Best Stocks to Buy

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Competition within supermarket aisles can be fierce, but Conagra is taking more and more share from its competition.

Frozen food sales are growing for the first time in five years, and Conagra is emerging as a standout performer. Net sales were up roughly 1% year over year in the fiscal third quarter, but within the refrigerated and frozen segment, net sales grew 3.2%. That came in at a total of $689 million.

This sales growth in a competitive climate was no accident either.

Conagra modernized three of its frozen brands - Healthy Choice, Marie Callender's, and Banquet - by tapping into health-conscious consumers. Its frozen meal modernization plan featured adding ingredients like kale, quinoa, edamame, and more unique flavors like Cuban pork and Korean beef. That helped turn declining sales into 2.6% growth.

The takeover of Pinnacle Foods adds even more options, including its Smart Balance, Glutino, and Gardein brands, among a host of family favorites like Birds Eye, Vlasic, and Duncan Hines.

Now Conagra is turning its attention to snacks, which make up 42% of revenue. Because it's adapting classic brands to modern tastes, we expect to see its snack sales spike, too.

And a major part of its modernization strategy will come through mergers and acquisition, just like the takeover of Pinnacle Foods and its purchase of Sandwich Brothers last year.

Conagra's management is looking for strong brands that can leverage Conagra's capabilities and grow sales. Sandwich Brothers, for example, makes healthy frozen breakfast sandwiches, which slots in perfectly to Conagra's modernization strategy.

Management isn't afraid to cut dead weight either. Conagra divested Del Monte fruit and Wesson oils last year to free up more money for acquisitions. These are strategic decisions we expect from a company serious about growing its market share.

On top of this, the company has even more plans to boost values for shareholders.

CAG set a three-year goal of increasing productivity by 20% and reducing working capital by more than 30%. Those goals should help reduce $500 million in annual expenses.

We don't consider this idle talk either. Management already improved CAG's gross margins from 28% to 30% since 2016. More cost savings and wider margins will help push share prices higher.

And with a Money Morning VQScore™ of 4 - our perfect score - there's simply no better time to buy.

It represents a strong value right now, currently trading at 17.65 times earnings, below its industry average of 19.12, and coupled with solid growth prospects, it's poised to surge.

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