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Comparing Hain Celestial’s Valuations against Its Peers

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Forward PE ratios

On July 6, Hain Celestial (HAIN) was trading at a 12-month forward PE (price-to-earnings) ratio of 22.9x. Following its fiscal third-quarter results,[1. fiscal Q3 2018 ended March 31] which were released on May 8, Hain Celestial’s valuation multiple has risen 50.8%.

Hain Celestial is trading at a higher valuation multiple than its peers. Campbell Soup (CPB), General Mills (GIS), and Conagra (CAG) traded at 12-month forward PE ratios of 15.2x, 14.6x, and 15.8x, respectively, on July 6.

A company’s forward PE ratio is calculated by dividing its stock price by analysts’ earnings estimates for the upcoming four quarters. The forward PE ratio is a generally reliable method for assessing investment decisions for companies in the same sector.

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Analysts’ growth estimates

Analysts expect Hain Celestial’s (HAIN) fiscal 2018 sales to reach $2.47 billion, down 13.5%. Its adjusted earnings per share are expected to decline 4.9% to $1.16. For fiscal 2019, analysts expect HAIN’s sales to rise 3.0% to $2.54 billion, and its adjusted earnings per share are expected to rise 15.0% to $1.34.

Hain Celestial is investing in increasing brand awareness and cutting costs under its Project Terra initiative. The company noted that it’s confident that the growing demand for organic foods could boost its sales going forward.

Peer comparisons

Analysts expect Campbell Soup’s (CPB) sales to increase 18.1% to $10.3 billion in fiscal 2019. Analysts expect its adjusted EPS to fall 3.5% to $2.75.

Analysts expect General Mills to report a 9.5% increase in sales to ~$17.2 billion in fiscal 2019. However, its adjusted earnings per share are expected to fall 1.5% to $3.06.

Analysts expect Conagra’s fiscal 2019 sales to increase 1.1% to $8.0 billion. Its earnings per share are expected to rise 6.2% to $2.24.

Wall Street’s projections are generally positive about the stock performance of these packaged food companies. These retailers are expected to benefit from extensive cost cuts as well as newly acquired brands. For example, Conagra acquired Pinnacle Foods, General Mills acquired Blue Buffalo Pet Foods, and Campbell Soup acquired Snyder-Lance. Also, the recently implemented corporate tax reforms are expected to cushion the bottom-line performance of these companies.

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