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Analyzing Hershey’s Stock Price Performance in 2015

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Historical returns

As of October 20, 2015, the Hershey Company’s (HSY) stock price increased by 1.1% YoY (year over year) to $94.21, compared to $93.22 on October 20, 2014. But on a year-to-date basis, Hershey’s stock price showed a decrease of 9.4% on October 20, 2015. These disappointing results can be attributed to China’s slowdown and the strong US dollar.

But Hershey’s stock, on the whole, has performed well over past five years. Its cumulative total stockholder return has consistently beaten the S&P 500 Index (SPY) and packaged food sector (XLP).

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Stock performances of peers

As of October 20, 2014, Hershey’s peer Mondelez International (MDLZ) has shown a strong upward movement over the TTM (trailing twelve months). Mondelez’s stock price increased by 41.3% to $45.74 on October 20, 2015, compared to $32.94 on the same date the previous year. This increase in stock price was primarily due to good financial results, the company’s divestment of its low-margin coffee business, and the report of another spin-off on the horizon.

Return Volatility

Hershey and Mondelez are non-cyclical stocks. Confectionery is not a necessity, in this sense, but the demand for it is generally stable. Thus, Hershey and Mondelez have betas of 0.33 and 0.96, respectively. In comparison, the S&P 500 Index has a beta of 1.0. As the graph above shows, Mondelez’s stock price has moved with S&P 500 Index since September 2014, whereas Hershey’s stock price has remained less responsive to the Index.

Return on equity

Hershey’s ROE (return on equity) was 55.4% in fiscal 2014. By way of comparison, Mondelez’s and Nestle’s (NSRGY) ROEs for fiscal 2014 were 7.3% and 21.8%, respectively. Notably, Hershey’s ROE is much higher than its peers as well as the consumer staples sector (XLP)—XLP’s ROE was 22.4% during same period.

But how does Hershey look in terms of market valuation relative to the S&P 500 Index? Continue to the next part of this series to find out.

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