Healthy internal sales growth, driven by consumer demand for natural food products, and the management's focus on improving profit margins bode well for Hain Celestial Group Inc's (HAIN) outlook. In addition, the management's acquisition strategy adds incremental growth to the company's organic sales. The Buy rating is maintained.
The company's management is focused on improving profitability through new product introductions, cost cutting programs, another Stock-Keeping Unit Rationalization Program, and new co-packing arrangements. The improvement of performance metrics improved with the adoption of Heinz's (HNZ) Operating Free Cash Flow and Cash Conversion Cycle model.
The company enjoys pricing flexibility with prices having been raised over eight times in the past four years. Hain Celestial successfully implemented a raise in prices most recently in May. These helped combat the rising costs of both ingredients and fuel.
Hain Celestial Group is currently selling at 19.8 times trailing 12 month EPS, reflecting the company's higher-than-average growth profile, given Hain's exposure to the natural food category. Net sales have grown at a 17.7% five year compound annual growth rate (CAGR). Over the last few years, the stock has traded in a wide P/E range of 30 to 17. The target price is $36.25, which is a 27 P/E multiple on 12 month trailing earnings.
Read the full analyst report on HAIN
Read the full analyst report on HNZ
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