Not surprisingly, The Simply Good Foods Company (NASDAQ: SMPL) One of the major performing consumer stocks in 2022.
With inflation and rising rates pushing the market against the backdrop of the Russia-Ukraine crisis, U.S. small cap stocks have struggled to build up strong performance from last year. The S&P 600 index is down 9% year-to-date – but there are some bright spots.
Simply Good Foods’ flat year-to-date returns have not only enriched shareholders, but it has also provided stability that you can expect in a volatile market. The owner of the popular Quest and Atkins brands is proving the value of his weight in protein bars, shakes and snacks. Consumers are buying these products despite the pressure of inflation.
We learned in the company’s latest quarterly report that moderate price increases are being easily digested by its health-conscious customer base. This is probably a sign of further gains as this protective stock benefits from the post-covid eating and exercise trend.
How did the Simply Good Foods Company perform in the last quarter?
As of September 2021, The Simply Good Foods Company has increased prices by 8% across its product lineup. We learned more about how consumers are responding to growth in the April 6th FY Q2 report.
It turns out that buyers are still not looking at higher prices. Sales increased 29% and adjusted EPS increased 44% year on year. Both figures beat the street manually. And while there was a pull-forward effect tied to the current quarter’s retail programs, the results show that supply chain-related spending pressures are being offset by strong demand.
Both the Quest and Atkins brands have performed well across convenience stores and online (Amazon) channels. Quest has gained market share in the active nutrition segment and Atkins has done the same in weight management, driven by higher sales volumes in key North American markets. Interestingly, the company’s 2021 fiscal year exit from the European market could be fortunate due to the growing economic impact of the Russia-Ukraine war in the region.
More encouraging than recent results is that management has patted its fiscal 2022 gross margin guidelines for a 2.5% reduction. This shows that the company has the ability to set a significant price after the recent price increase. This is highly competitive, low margin space, pricing capabilities everything.
The outlook for full-year sales growth has improved from 13% to 15%. At a time when U.S. economic growth is forecast to be in the low singular, such growth speaks volumes about the strength of the Quest and Atkins brands.
What is the growth potential of a simply good food company?
If the workplace trends turn for the better, there could be a significant uptick in the Management Warnings 2022 guidelines. This is because when people are working in the office they grab the nutrition bars and often tremble. The name of the game here is advantage. Conversely, when working from home, on-the-go lifestyle is less common and therefore the demand for ready-to-eat (RTE) food is also higher.
This is another aspect of the business — healthy chips and pizza — that go hand in hand with eating at home. So will this division suffer as much as other gains? Not necessarily.
With the persistence of healthy eating habits everywhere, shoppers are still expected to be drawn to their favorite Quest and Atkins items for home. And with healthy margins, analysts expect 17% and 11% bottom line growth in FY22 and FY23, respectively.
Did The Simply Good Foods Company Buy A Stock?
Shares of The Simply Good Foods Company have finished higher in every calendar year since their 2018 Nasdaq debut. Just because they are 242% ahead of the IPO does not mean that the uptrend will not continue.
From a technical analysis point of view, the stock is operating in a symmetrical continuation triangle pattern which is at the root of its breakout at the end of February. If we follow the upward movement of the East, we will see $ 50 in the coming weeks. Friday’s bullish MACD crossover on the weekly chart also points to a long-term uptrend.
Basically, Simply Good Foods also looks like a buy. In the wake of the epidemic, people have reached out for nutritious snacks and food replacements, and Quest and Atkins are among the brands they don’t mind paying for. This is a good indicator for increasing profitability and cash flow.
Like a box at the Atkins Bar, the Simply Good Foods stock is not cheap at 28x trailing earnings. Yet valuation is a price to pay considering that the company is providing an over-the-counter growth metric in an industry where profits are increasingly difficult.
This is not a stock that will double soon. But it is a stock that has a strong underlying demand trend that will support a gradual climb. In the current market environment, owning a growing food company is simply a good idea.