I say not any time soon. Sorry Cheap Stocks but this long-time favorite of kids is selling right where it should be considering its sales growth, or should I say lack thereof. Tootsie Roll (TR) needs a swift kick in the pants, one its two veteran managers/shareholders are unable to provide. Sales have grown exactly $100 million or just 25 percent in four years. Worse, operating income has actually dropped by a few million. With a dividend yield of slightly more than 1 percent, and a stock that has lost value since the beginning of 2002, there is little to cheer about. Even Hershey (HSY), often maligned for slow growth of its own, actually rose 60 percent during the same period.

Instead of maintaining faint hope for a recovery by current Tootsie Roll management, consider two other possibilities within the confectionary industry. The first, Imperial Sugar (IPSU) is a Texas staple providing cane sugar to southerners for over 100 years under the brands Imperial Sugar and Dixie Crystals. Sugar prices have risen dramatically over the past year improving the company’s profit picture, the best it’s been in five years. In the first quarter of 2007, even though sales actually dropped by 10 percent, operating profit went up 38 percent to $24 million or 35 percent of the total in 2006. The company is on a roll, no pun intended, and while Imperial Sugar stock has risen 30 percent already in 2007, it’s still got room to run. The stock has a price to sales ratio of .31, a trailing price to earnings ratio of 6, return on equity of 35 percent, almost no debt and $6 in cash in the bank. It’s a value play if there ever was one. However, there is no caveat: the company ties its can directly to the price of sugar, for good and bad.

The second possible opportunity is not a sure thing and may not even happen. I’m referring to the rumor that Cadbury Schweppes (CSG); once it’s sold the soft drinks division would turn around with the newfound cash and use it to buy Hershey, America’s biggest confectioner with 45 percent of the U.S. market. The deal makes a lot of sense, especially since Hershey controls Cadbury’s brands in America through a licensing agreement made 20 years ago. The combination would dwarf Mars. Combine the Cadbury Bar with the Hershey Kiss and you have an awfully sweet company.

I’m not going to break out all the numbers in this post but I will recommend that you buy Cadbury stock rather than Hershey. While you benefit from any premium paid to Hershey, a likely scenario, long-term you’ll gain far more by owning the future Cadbury-Hershey combination. Some suggest that Cadbury stock is currently too high given a recent run-up in price on the takeover rumors. Maybe, but if you think the deal makes sense, like I do, you should be buying now.