Swiss food giant Nestle (OTCBB:NSRGY) has a well-earned reputation for excellence, and the Street has long been happy to pay a premium for that performance. That's all well and good for those who own shares, but it makes waiting around for an opportunity to buy a bit frustrating. With the stock still trading at a hefty premium, investors can find better deals in the food sector.

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First Quarter Results Slightly Ahead of Target
Nestle reported somewhat encouraging numbers with its truncated first quarter report. Like many European companies, Nestle offered up only information on sales, and little else.

Internal sales rose more than 7%, about a half-point above sell side expectations. This growth was comprised of over 4% price growth and just under 3% volume growth. More interesting, emerging market sales rose about 13%, while sales to developed markets rose just around 3%.

SEE: Strategies For Quarterly Earnings Season

Breaking Down By Segments
Nestle's nutrition business saw nearly 6% organic growth. That's inferior to Abbott's (NYSE:ABT) first quarter nutrition numbers, while Mead Johnson (NYSE:MJN) has yet to report. The company noted that weight management was a weak area.

Nestle Waters grew nicely (up 8%), but seemed to lag Coca-Cola's (NYSE:KO) first quarter performance. Comparisons in other categories like packaged food are not very relevant at this point in the earnings cycle, as comparable companies have yet to report in most cases.

Paying a Big Price For Pfizer's Nutrition
On Monday, the results of Pfizer's (NYSE:PFE) sale of its nutrition business were announced, and Nestle was the winner. Nestle will pay nearly $12 billion for Pfizer's nutrition business - a business with single-digit share of the global baby food business, but a stronger position in China.

Nestle is paying roughly a premium of 20 times EBITDA for this business - well above what it paid for Gerber (15.7 times) and the Novartis (NYSE:NVS) nutrition business (17.5 times). These are lucrative businesses with wide moats, though, and Nestle's prior acquisitions have arguably proven to be worth the premiums. Moreover, while Nestle is one of the world's largest players in infant nutrition worldwide, they've had less success penetrating the Chinese market.

SEE: A Clear Look At EBITDA

The Bottom Line
Nestle has a lot to support its valuation. Not only does the company hold top share in many of its addressed markets, but it also is one of the most successful companies at penetrating emerging markets (with roughly one-third of its sales coming from developing economies). Better still, the company constantly innovates and refreshes its line-up, while also delivering some of the best returns in the sector.

All of that is great, but does not mean that investors should pay just any price. Even with strong ongoing growth, it's difficult to push fair value on Nestle shares north of $60, making it look quite expensive today on both a relative and absolute basis. While Nestle would be high on my list of companies to buy if they got cheap, even the best companies can be bad stocks when bought too early.

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At the time of writing, Stephen Simpson did not own shares in any of the companies mentioned in this article.

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