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Category: Stock Market and Simply Good Foods
Date: 7 April 2020 Stock Price: $17.14 We take a look at the 2nd quarter earnings report of their 2020 fiscal year of The Simply Good Foods Company, a company whose portfolio is largely made up by nutrition bars and ready to drink shakes
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About The Simply Good Foods Company
The Simply Good Foods Company (Nasdaq: SMPL), headquartered in Denver, Colorado, is a highly-focused food company with a product portfolio consisting primarily of nutrition bars, ready-to-drink shakes, sweet and salty snacks and confectionery products marketed under the Atkins®, Quest®, SimplyProtein® and Atkins Endulge® brand names. Simply Good Foods is poised to expand its wellness platform through innovation and organic growth along with investment opportunities in the snacking space and broader food category. Simply Good Foods aims to lead the nutritious snacking movement with trusted brands that offer a variety of convenient, innovative, great-tasting, better-for-you snacks and meal replacements
Overview of Simply Good Foods' 2nd quarter 2020 earnings report
- Net sales: $227.101 million (up from $123.800 million for the same quarter of the previous year)
- Net sales increased by 83.4% over the last 12 months
- Cost of sales: $141.707 million (up from $74.145 million for the same quarter of the previous year)
- Cost of sales increased by 91.1% over the last 12 months
- Some margin squeeze as the group's net sales grew at a slower rate than their cost of goods sold
- Net earnings: 10.657 million (down from $12,722 million for the same quarter of the previous year)
- Diluted earnings per share: $0.11 (down from $0.15 per share for the same quarter of the previous year)
- Diluted weighted-average shares outstanding: 100.366 million (up from 85.350 million for the same quarter of the previous year)
- Cash and cash equivalents: $46.155 million
- Cash and cash equivalents per share: $0.46
- Cash and cash equivalents makes up 2.68% of Simply Good Foods' market capital
- Cash and cash equivalents makes up 2.3% of Simply Good Foods' total assets
- Accounts receivable: $89.996 million
- Accounts receivable makes up 3.9 % of Simply Good Foods' total assets
- Inventories: $79.552 million
- Inventories makes up 4.5% of Simply Good Foods' total assets
- Goodwill: $570.716 million
- Goodwill makes up 28.5% of Simply Good Foods' total assets.
- Goodwill amounts to $5.68 a Simply Good Foods' stock
- Stockholders equity of Simply Good Foods: $1.197 billion
- Stockholders equity per share for Simply Good Foods' : $11.92
- So Simply Good Foods' is trading at 1.43 times it stockholders equity per share which is outside the expected range of between 2 and 4 times most companies tend to trade at.
- For comparison, the average price to book value of the S&P 500 is 3.34 (Read more about the S&P500 here)
Simply Good Foods' management commentary on the results and earnings guidance
DENVER, April 06, 2020 (GLOBE NEWSWIRE) -- The Simply Good Foods Company (Nasdaq: SMPL) (“Simply Good Foods,” or the “Company”), a developer, marketer and seller of branded nutritional foods and snacking products, today reported financial results for the thirteen week period ended February 29, 2020. The Company completed the acquisition of Quest Nutrition, LLC (“Quest”) on November 7, 2019. The Company’s second quarter results include thirteen weeks of Quest results and about 16 weeks for the year-to-date period. Additionally, note that the Company’s reference to “legacy Atkins” in this press release encompasses Simply Goods Foods’ business excluding Quest.
“Total Simply Good Foods retail takeaway for the thirteen weeks ended February 29, 2020 was 11.8%, in U.S. measured channels, outpacing nutritional snacking category growth. Atkins® brand retail takeaway in the second quarter increased 6.1% despite a very difficult comparison in the same period a year ago. Additionally, Atkins® non-measured e-commerce business momentum continued and contributed to our second quarter net sales growth. Quest® brand retail takeaway in measured channels continued to be strong and increased 27.1% in the quarter and the Quest® brand e-commerce business also continued to be very strong.”
“Overall, the first half of fiscal 2020 performance exceeded our expectations with no material effects from COVID-19. The Quest integration is progressing well and we are on track with our timeline to achieve the identified $20 million in synergies. As such, we began the second half of the year confident in our ability to achieve our previously communicated fiscal year 2020 outlook. Since March, however, retail foot traffic has been volatile with positive spikes in the beginning of the month followed by a significant slowdown in the second half of the month. Given the uncertainty around consumer purchasing behavior due to COVID-19 movement restrictions, among other unknown potential COVID-19 related effects, we believe it is prudent to withdraw our fiscal 2020 full year guidance at this time.”
Outlook
“We entered the second half of the fiscal year with positive net sales momentum, solid cost containment and confidence in our ability to execute our plans to deliver on our financial objectives. Furthermore, the Quest integration is on-track and our synergy plans are proceeding as expected. However, volatile retail foot traffic in March has impacted our retail takeaway. Specifically, in the first half of the month, retail takeaway of our products was very strong; however, this has been followed by a notable slowdown underscoring the unpredictable nature of current consumer purchasing behavior we believe is a result of the current COVID-19 movement restrictions,” Scalzo continued. “The severity and duration of the COVID-19 pandemic is uncertain and will likely continue during the second half of our fiscal year. Therefore, given the rapidly evolving situation and the uncertainty related to potential effects of the COVID-19 outbreak, we believe it is prudent to withdraw our previously communicated fiscal 2020 outlook.”
“We continue to believe that health and wellness is important to consumers and the nutritional profiles of our products satisfy many of their snacking and meal replacement needs. There are many long-term growth opportunities that exist within our business and the high-growth underpenetrated nutritional snacking category. Our employees have adjusted remarkably well to a remote work environment, and we are fortunate to have an experienced management team and Board of Directors to navigate the short-term challenges of this situation while positioning the business for continued long-term growth. We will continue to monitor the situation and will provide additional perspective on the year during our fiscal third quarter conference call in early July,” Scalzo concluded.
“Overall, the first half of fiscal 2020 performance exceeded our expectations with no material effects from COVID-19. The Quest integration is progressing well and we are on track with our timeline to achieve the identified $20 million in synergies. As such, we began the second half of the year confident in our ability to achieve our previously communicated fiscal year 2020 outlook. Since March, however, retail foot traffic has been volatile with positive spikes in the beginning of the month followed by a significant slowdown in the second half of the month. Given the uncertainty around consumer purchasing behavior due to COVID-19 movement restrictions, among other unknown potential COVID-19 related effects, we believe it is prudent to withdraw our fiscal 2020 full year guidance at this time.”
Outlook
“We entered the second half of the fiscal year with positive net sales momentum, solid cost containment and confidence in our ability to execute our plans to deliver on our financial objectives. Furthermore, the Quest integration is on-track and our synergy plans are proceeding as expected. However, volatile retail foot traffic in March has impacted our retail takeaway. Specifically, in the first half of the month, retail takeaway of our products was very strong; however, this has been followed by a notable slowdown underscoring the unpredictable nature of current consumer purchasing behavior we believe is a result of the current COVID-19 movement restrictions,” Scalzo continued. “The severity and duration of the COVID-19 pandemic is uncertain and will likely continue during the second half of our fiscal year. Therefore, given the rapidly evolving situation and the uncertainty related to potential effects of the COVID-19 outbreak, we believe it is prudent to withdraw our previously communicated fiscal 2020 outlook.”
“We continue to believe that health and wellness is important to consumers and the nutritional profiles of our products satisfy many of their snacking and meal replacement needs. There are many long-term growth opportunities that exist within our business and the high-growth underpenetrated nutritional snacking category. Our employees have adjusted remarkably well to a remote work environment, and we are fortunate to have an experienced management team and Board of Directors to navigate the short-term challenges of this situation while positioning the business for continued long-term growth. We will continue to monitor the situation and will provide additional perspective on the year during our fiscal third quarter conference call in early July,” Scalzo concluded.
Simply Good Foods (NASDAQ: SMPL) stock price history
The image below, obtained from Google, shows the stock price history of Simply Good Foods since its listing in middle of 2017. And it's been a very good time for Simply Good Foods stockholders. At listing it was trading at around $12 a stock and its currently trading at $17.14 a stock. That's a decent return of 42.8% provided by Simply Good Foods to its stockholders since its listing less than 3 years ago.
The stock of Simply Good Foods is trading at a lot closer to its 52 week low of $14.08 than it is to its 52 week high of $31.34 which to us is a clear indication that the short term momentum and sentiment of Simply Good Foods is very negative right now, as is the case with most listed stocks considering the significant market sell offs we have seen triggered by the global Coronavirus pandemic.
The stock of Simply Good Foods is trading at a lot closer to its 52 week low of $14.08 than it is to its 52 week high of $31.34 which to us is a clear indication that the short term momentum and sentiment of Simply Good Foods is very negative right now, as is the case with most listed stocks considering the significant market sell offs we have seen triggered by the global Coronavirus pandemic.
Recent coverage of Simply Good Foods Company
The extract below shows some of the latest coverage on Simply Good Foods from MarketWatch.com
Simply Good Goods Co. SMPL, -8.68% stock jumped 7.1% in Monday premarket trading after the nutritional food company reported fiscal second quarter earnings and sales that beat expectations. Net income totaled $10.7 million, or 11 cents per share, down from $12.5 million, or 15 cents per share last year. Adjusted EPS of 23 cents beat the FactSet consensus for 17 cents. Sales of $227.1 million were up from 123.8 million last year and well ahead of the $221.0 million FactSet consensus. Simply good Foods portfolio includes Atkins and Quest Nutrition. March began with "positive spikes," according to Joseph Scalzo, the company's chief executive in a statement. However, there was a "significant slowdown" in the second half of the month. Due to volatility related to the coronavirus, Simply Good Foods has withdrawn its full-year fiscal 2020 guidance. Simply Good Foods stock is down 17.4% for the past year while the S&P 500 index SPX, +7.03% is down 14% for the period.
Read the full article here
Simply Good Goods Co. SMPL, -8.68% stock jumped 7.1% in Monday premarket trading after the nutritional food company reported fiscal second quarter earnings and sales that beat expectations. Net income totaled $10.7 million, or 11 cents per share, down from $12.5 million, or 15 cents per share last year. Adjusted EPS of 23 cents beat the FactSet consensus for 17 cents. Sales of $227.1 million were up from 123.8 million last year and well ahead of the $221.0 million FactSet consensus. Simply good Foods portfolio includes Atkins and Quest Nutrition. March began with "positive spikes," according to Joseph Scalzo, the company's chief executive in a statement. However, there was a "significant slowdown" in the second half of the month. Due to volatility related to the coronavirus, Simply Good Foods has withdrawn its full-year fiscal 2020 guidance. Simply Good Foods stock is down 17.4% for the past year while the S&P 500 index SPX, +7.03% is down 14% for the period.
Read the full article here
Simply Good Foods Company (NASDAQ: SMPL) latest stock valuation
So what is Simply Good Foods stock worth based on the release of their latest earnings report and their outlook provided. Based on their earnings report and the outlook provided our valuation model provides a target price (full value price) for Simply Good Foods' of $13.80 a stock (down from our 1st quarter 2020 earnings report valuation of Simply Good Foods). We therefore believe that the stock is overvalued.
We usually suggest long term investors look to enter a stock at least 10% below our target (full value) price which in this case is $13.80. So a good entry point into Simply Good Foods' stock would be at $12.40 or below.
We expect the stock of Simply Good Foods to pull back from current levels to levels closer to our target price (full value price) in coming weeks and months.
We usually suggest long term investors look to enter a stock at least 10% below our target (full value) price which in this case is $13.80. So a good entry point into Simply Good Foods' stock would be at $12.40 or below.
We expect the stock of Simply Good Foods to pull back from current levels to levels closer to our target price (full value price) in coming weeks and months.
Next earnings release for Simply Good Foods Company
It is expected that Simply Good Foods Company will release their 3rd quarter 2020 earnings report in early July 2020