On Monday, Jefferies reiterated its Hold rating on The Simply Goods Group (NASDAQ:SMPL), maintaining a $36.00 price target.
The firm's analysis of Simply's Fiscal Year 2024 10-K filing revealed new details regarding the OWYN acquisition, potential synergies, e-commerce growth, and outcomes from the Atkins brand impairment tests. Despite the positive momentum observed with the Quest and OWYN brands, Jefferies has chosen to remain cautious due to the uncertain outcomes of the revitalization efforts for the Atkins brand.
The analyst noted that Simply Goods Group's shares are currently trading at approximately 18 times earnings per share, which includes depreciation, amortization, and stock-based compensation. This valuation represents a modest discount compared to other high-growth consumer and snacking companies, which typically trade around 19 times earnings.
The evaluation implies that the stock's current price is fairly valued concerning its peers within the industry.
The Simply Goods Group, known for its diverse portfolio including the Atkins brand, has been under scrutiny as it attempts to rejuvenate the Atkins product line. While the company has seen some success with its other brands, the lack of clear progress in Atkins' turnaround has led to a more conservative stance from Jefferies.
The assessment by Jefferies comes after a thorough examination of Simply's latest annual report, which provided insights into its recent business transactions and financial health. The report's findings on e-commerce penetration rates and the specifics of the OWYN transaction are considered incremental information that could impact the company's future performance.
In other recent news, The Simply Good Foods Company (NASDAQ:SMPL) reported a 17.2% rise in net sales for the fourth quarter, largely due to the acquisition of OWYN. The company's North America Quest net sales increased by 5%, while Atkins saw a 5% decline. Adjusted EBITDA for the quarter grew by 15% to $77.5 million.
For the fiscal year 2025, the company projects a net sales growth of 4% to 6%, with adjusted EBITDA growth slightly exceeding sales growth.
Stephens reaffirmed its Overweight rating on Simply Good Foods, maintaining a price target of $42.00. The firm's analysis suggests future growth potential despite challenges with the Atkins brand, which is expected to face pressures in fiscal year 2025. Meanwhile, TD Cowen maintained a Hold rating, acknowledging the company's ambitious plans for the fiscal year 2025 but noting the risks involved.
The company's recent developments also include the repositioning of Atkins to align with consumer preferences for sustainability and relevancy. The Quest brand continues to be a key growth driver for the company, and OWYN showed impressive results with point-of-sale growth of around 80%.
Despite some challenges, Simply Good Foods remains optimistic about its ability to leverage consumer trends favoring convenience, protein-rich, low-calorie, and low-sugar products.
InvestingPro Insights
The Simply Good Foods Company (NASDAQ:SMPL) presents a mixed financial picture that aligns with Jefferies' cautious stance. According to InvestingPro data, SMPL's market capitalization stands at $3.42 billion, with a P/E ratio of 24.71, slightly above the 18x mentioned in the article. This valuation suggests investors are pricing in some growth expectations.
InvestingPro Tips highlight that SMPL operates with a moderate level of debt and has liquid assets exceeding short-term obligations, indicating a stable financial position. This could provide the company with flexibility as it works on revitalizing the Atkins brand and integrating the OWYN acquisition.
The company's revenue growth of 7.13% over the last twelve months, coupled with a 17.25% quarterly revenue growth, demonstrates positive momentum. This aligns with the article's mention of success in the Quest and OWYN brands. However, an InvestingPro Tip notes that SMPL is trading at a high P/E ratio relative to near-term earnings growth, which may justify Jefferies' Hold rating.
For investors seeking a more comprehensive analysis, InvestingPro offers 6 additional tips for SMPL, providing deeper insights into the company's financial health and market position.
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