On Wednesday, Stephens, a financial services firm, revised its price target for The Simply Good Foods Company (NASDAQ:SMPL), a nutritional food and snack company. The new price target is set at $42.00, down from the previous $44.00, while the firm has maintained an Overweight rating on the stock.
The adjustment follows a period of underperformance for Simply Good Foods' shares, which have seen a decline of approximately 20% year-to-date. The company's struggles are primarily attributed to disappointing results from its Atkins brand, which has impacted the overall performance of the company's portfolio.
Despite the challenges with Atkins, Stephens points out that Simply Good Foods is still outpacing its peers in terms of growth. The firm notes that the company has one of the highest top-line growth rates in the packaged food and beverage sector for the next twelve months (NTM). Nevertheless, SMPL's stock is currently trading at a significant discount compared to the median of its peer group, with its valuation multiple nearing a five-year low.
Stephens remains optimistic about the company's prospects, emphasizing the strength of Simply Good Foods' diverse range of protein-rich products. The firm believes that even with the current issues at Atkins, the company's portfolio is well-positioned for growth, outperforming its peer group.
In summary, while the price target for Simply Good Foods has been lowered to reflect recent performance issues, Stephens upholds a positive outlook on the company, maintaining an Overweight rating with a revised target of $42.00.
In other recent news, Simply Good Foods is set to report its earnings soon, with Jefferies maintaining a Hold rating on the company and a steady price target of $36.00. The firm projects that Simply Goods will end fiscal year 2024 with a 7% sales increase and an 8% growth in adjusted EBITDA. However, the outlook for fiscal year 2025 suggests a modest rise in organic sales by 4-6%.
The company has seen significant changes in its executive lineup, with Mike Clawson becoming the new Chief Customer Officer. This follows the departure of Jill Short and Chief Growth Officer, Ms. Linda M. Zink. DA Davidson, another analyst firm, has increased its price target for Simply Good Foods while maintaining a neutral rating.
In terms of financial performance, Simply Good Foods reported a 3.1% increase in net sales in its fiscal third-quarter results, reaching $334.8 million, primarily driven by the Quest brand. The company's gross margin also saw a significant rise to 39.9% due to reduced costs for ingredients and packaging.
InvestingPro Insights
To complement the analysis provided by Stephens, recent data from InvestingPro offers additional context on The Simply Good Foods Company's financial position. Despite the challenges faced by the Atkins brand, InvestingPro data shows that SMPL has maintained a revenue growth of 6.66% over the last twelve months as of Q3 2024, with a robust gross profit margin of 38.09%. This aligns with Stephens' observation that the company is outpacing its peers in growth.
InvestingPro Tips highlight that SMPL operates with a moderate level of debt and has liquid assets exceeding short-term obligations, which could provide financial flexibility as the company navigates its current challenges. Additionally, analysts predict that the company will remain profitable this year, supporting Stephens' optimistic outlook.
However, it's worth noting that SMPL is trading at a high P/E ratio relative to its near-term earnings growth, with a P/E ratio of 22.24. This valuation metric, combined with the stock's current price at 75.6% of its 52-week high, reflects the market's cautious stance that Stephens has addressed.
For investors seeking a more comprehensive analysis, InvestingPro offers additional tips and insights beyond those mentioned here. The platform currently lists 6 tips for SMPL, providing a deeper dive into the company's financial health and market position.
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