On Friday, DA Davidson adjusted its outlook on shares of The Simply Goods Group (NASDAQ:SMPL), increasing the price target to $38.00 from the previous $35.00, while maintaining a Neutral rating on the stock. The new target reflects a more balanced perspective on the company's recent performance and future prospects.
The firm's analysts noted a mixed sentiment towards the company's various segments. While expressing concerns over the Atkins brand due to low visibility, they acknowledged that Quest, excluding the bars category, has shown positive response to recent investments. The analysts also mentioned that the initial guidance for the contribution from Only What You Need (OWYN) seems reasonable, possibly even conservative.
Despite some positive developments, the analysts believe that the stock is currently fairly valued, especially considering the anticipated underperformance of the legacy SMPL business in the upcoming year.
Still, they also highlighted potential for growth in fiscal year 2026, driven by synergies from OWYN and a reset of the Atkins brand. They estimated that these factors could lead to a mid $40s share price if historical relative EV/EBITDA multiples are applied.
The report concluded with the analysts' position that greater assurance of the Atkins brand's stabilization is necessary before adopting a more constructive stance on The Simply Goods Group's stock.
In other recent news, Simply Good Foods Company reported a rise in its fiscal third-quarter net sales by 3.1%, reaching a total of $334.8 million. This growth is largely due to the expansion of the Quest brand's volume. Moreover, the company's gross margin experienced substantial improvement, climbing to 39.9% as a result of decreased ingredient and packaging costs.
The quarter also saw the conclusion of the OWYN acquisition, with the expectation that OWYN's net sales will contribute between $25 million and $30 million in the fourth quarter. Despite the projected gross margin compression in fiscal 2025 due to input cost inflation, Simply Good Foods maintains its full-year forecast, predicting an approximate 8% growth in adjusted EBITDA.
Moreover, the company is concentrating on innovation and marketing for high protein, low sugar, and low-carb options. The integration of OWYN is anticipated to strengthen the company's stance in the shake segment and broaden its plant-based offerings.
Still, a decline in international net sales by 2.4% and an expected decrease in Atkins brand performance in fiscal year 2025 due to lower ROI trade and marketing investments were also reported.
These are recent developments that offer insight into the company's current financial status and future expectations.
InvestingPro Insights
As The Simply Goods Group (NASDAQ:SMPL) navigates through various market conditions, DA Davidson's new price target suggests a cautious yet optimistic outlook. InvestingPro data indicates a market capitalization of $3.57 billion and a P/E ratio of 24.48, aligning with the analysts' view of the stock being fairly valued at current levels. Notably, the company's revenue growth over the last twelve months stands at 6.56%, showcasing steady progress.
Key InvestingPro Tips highlight that The Simply Goods Group's liquid assets surpass short-term obligations, and the company operates with a moderate level of debt, suggesting a solid financial position. Moreover, analysts predict profitability this year, which may reassure investors looking for stable returns. For those interested in deeper analysis, there are additional InvestingPro Tips available, providing a more comprehensive understanding of SMPL's financial health and market performance.
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