On Wednesday, CFRA adjusted its outlook for Hain Celestial (NASDAQ:HAIN) Group Inc shares (NASDAQ:HAIN), reducing the 12-month price target from $8.50 to $8.00 while retaining a Hold rating on the stock.
The revised stock target is based on an 8.5x enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) multiple applied to the forecasted adjusted EBITDA of $156 million for the fiscal year 2025, which has been decreased from the previous estimate of $175 million. This valuation stands in contrast to the historical long-term average of 14x.
The firm also made minor adjustments to its earnings per share (EPS) projections, raising the fiscal year 2024 estimate by $0.01 to $0.33 and decreasing the fiscal year 2025 estimate to $0.42 from $0.52. The changes follow Hain Celestial's third-quarter sales report, which showed a 3.7% year-over-year decline to $438 million, falling short of the anticipated $463 million consensus.
The shortfall was attributed to a combination of factors, including infant formula shortages due to supplier issues with Perrigo, under performance in the Snacks segment excluding Garden Veggie, and a 34% drop in Personal Care sales, which was affected by changes in the product portfolio.
The company has once again revised its guidance for fiscal year 2024, now expecting organic sales growth to decline by 3% to 4%, a change from the previously forecasted 1% growth. The adjusted EBITDA guidance has also been lowered to a range of $150 million to $155 million from the earlier range of $155 million to $160 million.
Despite these challenges, Hain Celestial reported a silver lining with a reduction in net debt by 6% year-to-date from fiscal year 2023, bringing the total down to $728 million. This reduction has improved the company's leverage ratio to 3.9x, a decrease from 4.3x at the end of fiscal year 2023.
The analyst noted that while Hain Celestial's turnaround efforts are taking longer than initially expected, the issues appear to be isolated to specific segments such as baby formula, personal care, and plant-based meat, with approximately 85% of its business achieving over 3% growth year-to-date.
InvestingPro Insights
In light of the recent adjustments to Hain Celestial Group Inc's financial outlook, InvestingPro provides additional insights that could be crucial for investors. With a market capitalization of $612.66 million, Hain Celestial's valuation implies a strong free cash flow yield, according to InvestingPro Tips.
This could signal potential for investors, especially considering the company's net income is expected to grow this year. Even though the stock has experienced significant price drops over the past year, analysts predict the company will be profitable this year, which could point to a potential turnaround.
Key InvestingPro Data metrics show a P/E Ratio (Adjusted) for the last twelve months as of Q2 2024 at 47.33, which when paired with the company's high shareholder yield, presents a nuanced perspective on the stock's value.
Moreover, the company's liquid assets exceed its short-term obligations, suggesting financial stability in covering immediate liabilities. For investors seeking more comprehensive analysis, there are additional InvestingPro Tips available that delve deeper into Hain Celestial's financial health and future prospects.
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