On Wednesday, Jefferies maintained a Hold rating on The Simply Goods Group (NASDAQ:SMPL), with a consistent price target of $36.00. The firm anticipates that Simply Goods will close its fiscal year 2024 with results that align with expectations, showing a sales increase of 7% and an adjusted EBITDA growth of 8%. The outlook for fiscal year 2025 suggests a guidance towards the lower end of the company's growth algorithm, with organic sales projected to rise by 4-6%.
The analyst from Jefferies noted that despite the expected contribution from OWYN, Simply Goods' next-year profits are likely to see limited growth due to soft trends in the Atkins brand. A recovery is projected for the second half of fiscal year 2025. However, until there is clearer visibility, the potential for the company's market multiple to expand seems restricted, especially when compared to its peers. Simply Goods trades at 16 times forward-year three earnings versus 19 times for its counterparts.
Simply Goods is scheduled to report its earnings before the market opens on October 24th. The anticipation surrounding the report is tempered by the prediction of continued weak Atkins trends, which are expected to persist into the next year. The firm's commentary suggests that investors may have to wait until the latter half of fiscal year 2025 for a more significant turnaround.
The current market valuation of Simply Goods reflects a cautious stance from investors, who may be looking for stronger signs of growth and profitability before driving the stock's multiple closer to that of its industry peers. With the upcoming earnings report, stakeholders will be keen to see if the company can meet its end-of-year targets and provide a more detailed forecast for the next fiscal period.
In summary, Simply Goods Group's stock maintains a steady position as Jefferies reiterates its Hold rating and price target. The company's near-term prospects appear to be weighed down by modest profit expectations and ongoing softness in one of its key brands. Investors will be watching closely for the upcoming fiscal report to gauge the company's performance and future potential.
In other recent news, Simply Good Foods has seen significant changes in its executive lineup. Mike Clawson is set to become the new Chief Customer Officer, bringing with him a wealth of experience from his tenure at Del Monte Foods. This appointment comes on the heels of the departure of Jill Short, a long-standing member of the company's leadership. In addition, the company announced the departure of its Chief Growth Officer, Ms. Linda M. Zink, as part of a strategic realignment of duties within the senior management team.
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. This growth was primarily driven by the expansion of the Quest brand. The company's gross margin also saw a significant rise to 39.9% due to reduced costs for ingredients and packaging.
Analysts have also weighed in on the company's performance. DA Davidson increased its price target for Simply Good Foods while maintaining a neutral rating. These developments come as Simply Good Foods continues to integrate the OWYN business and reaffirms its full-year forecast, predicting an approximate 8% growth in adjusted EBITDA.
InvestingPro Insights
To complement the analysis provided by Jefferies, recent data from InvestingPro offers additional context for investors considering The Simply Good Foods Company (NASDAQ:SMPL). As of the latest available data, SMPL's market capitalization stands at $3.34 billion, with a price-to-earnings (P/E) ratio of 22.75. This P/E ratio aligns with the InvestingPro Tip indicating that SMPL is "trading at a high P/E ratio relative to near-term earnings growth," which supports Jefferies' cautious stance on the stock's valuation.
The company's revenue for the last twelve months as of Q3 2024 was $1.28 billion, with a modest growth of 6.66%. This growth rate is consistent with Jefferies' projection of a 7% sales increase for fiscal year 2024. Additionally, SMPL's gross profit margin of 38.09% and operating income margin of 17.25% suggest a solid financial foundation, despite the challenges faced by the Atkins brand.
InvestingPro Tips also highlight that SMPL "operates with a moderate level of debt" and has "liquid assets exceed[ing] short term obligations," which could provide some financial flexibility as the company navigates through the projected soft period and works towards recovery in the latter half of fiscal year 2025.
For investors seeking a more comprehensive analysis, InvestingPro offers 5 additional tips that could provide further insights into SMPL's financial health and market position.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.