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Thursday, Mizuho (NYSE:MFG) reiterated its Outperform rating and $45.00 price target on The Simply Goods Group (NASDAQ:SMPL), representing a 24% upside from the current price of $36.23. According to InvestingPro data, the company maintains a "GREAT" financial health score of 3.18 out of 5, supporting Mizuho's positive outlook in the challenging Food industry. The firm noted that while the broader industry grapples with weak volumes and downward pricing pressure, Simply Goods has delivered a positive surprise with its revenue performance.
The analyst from Mizuho highlighted the continued sales growth driven by new innovations and distribution strategies at Quest, which have sustained double-digit sales increases. This aligns with InvestingPro data showing impressive revenue growth of 9.07% over the last twelve months, with total revenue reaching $1.36 billion. Get access to 7 more exclusive ProTips and comprehensive financial analysis with InvestingPro. Additionally, a modest upward revision to the fiscal year 2025 revenue forecast for OWYN reflects confidence in the brand's distribution prospects.
Despite the anticipation that the gross margin gains seen in the second quarter are unlikely to be repeated in the second half of the year due to expected shifts in commodity costs and other expenses, the unchanged fiscal year 2025 gross margin guidance, which now includes preliminary cost estimates for tariffs, was seen as a positive sign.
The reiteration of the fiscal year 2025 guidance suggests that while the second half may experience softer sales and EBITDA compared to Street expectations, the year is still on track. Any potential promotional pressures from the Atkins segment appear to be balanced by strength in other areas of Simply Goods' portfolio.
Mizuho also pointed out the company's healthy financial leverage, with net leverage at 0.7 times, indicating that approximately 75% of the term loan increase from the OWYN acquisition has been repaid. This is reflected in the company's strong liquidity position, with a current ratio of 4.23 and a moderate debt-to-equity ratio of 0.22, according to InvestingPro analysis. The firm ended its note by maintaining Simply Goods as its top pick in the Small to Mid-sized (SMID) segment. For detailed insights and Fair Value analysis of SMPL and 1,400+ other stocks, explore InvestingPro's comprehensive research reports.
In other recent news, Simply Good Foods Co reported better-than-expected earnings for the second quarter of fiscal year 2025. The company achieved an adjusted earnings per share (EPS) of $0.46, surpassing analysts' estimates of $0.41, and recorded revenue of $359.7 million, which was higher than the anticipated $354.55 million. Bernstein analysts responded to these results by raising their price target for Simply Good Foods to $48, maintaining an Outperform rating. This adjustment was made despite the company's consistent fiscal year 2025 guidance amidst industry-wide guidedowns due to rising input costs, including cocoa.
Simply Good Foods' acquisition of OWYN, a plant-based beverage company, is expected to soon contribute to the company's organic sales growth as the anniversary of the acquisition approaches. The company's adjusted EBITDA increased by 17.6% to $68 million, demonstrating effective cost management and market expansion. The firm also continues to reduce its debt, which has improved its financial stability. Bernstein's raised price target is based on an increased EBITDA estimate for Simply Good Foods, reflecting confidence in its financial health and ability to navigate market challenges.
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