Last Update 21 Nov 25
SMPL: Share Buybacks And Neutral Ratings Will Drive Shareholder Value Forward
Analysts have lowered their price target for Simply Good Foods from $36 to $27. They cite expectations for another dynamic earnings season in the U.S. consumer staples sector.
Analyst Commentary
Bullish Takeaways
- Bullish analysts highlight Simply Good Foods' ability to navigate a challenging operating environment. This could lead to improved execution during the upcoming earnings season.
- Some point to the company's continued presence in the U.S. consumer staples sector as a sign of resilience and an opportunity for steady, long-term growth.
- Analysts note that maintaining a Neutral rating reflects confidence in the company's balanced performance, with no immediate signs of severe underperformance versus peers.
- Expectations for sustained consumer demand, even in dynamic market conditions, are seen as a positive factor supporting valuation stability going forward.
Bearish Takeaways
- Bearish analysts are cautious regarding the lowered price target. This suggests concerns over growth momentum and the potential for earnings volatility.
- There are questions about the company’s ability to grow margins in a highly competitive and inflationary environment.
- Some view the Neutral rating and price target reduction as indicators of uncertainty around catalysts that could drive material upside in the near term.
- Execution risks remain a focus, particularly as broader consumer trends shift and cost pressures persist across the sector.
What's in the News
- Simply Good Foods completed the repurchase of 3,949,038 shares, representing 3.98% of outstanding shares, for $129 million under its existing buyback program. (Company Filing)
- The company announced an increase in its equity buyback plan, raising total authorization by $150 million to a new total of $300 million. (Company Filing)
- Fiscal year 2026 guidance released: net sales expected to range between -2% and +2% year-over-year, with gross margins forecasted to decline by 100 to 150 basis points. (Corporate Guidance)
- Quest Nutrition, a Simply Good Foods brand, launched Quest Bake Shop Chocolate Frosted Donuts. Each serving offers 14 grams of protein, 13 grams of fiber, and less than 1 gram of sugar. (Product Announcement)
Valuation Changes
- Fair Value Estimate remains unchanged at $29.70 per share, indicating stability in fundamental assessment.
- Discount Rate has risen slightly from 6.78% to 6.96%, reflecting updated market risk assumptions.
- Revenue Growth expectation is virtually flat, moving from 2.90% to 2.90% year over year.
- Net Profit Margin remains steady, holding at approximately 11.99% for forecasted periods.
- Future P/E Ratio has increased modestly from 18.32x to 18.41x, signaling a minor uptick in forward valuation multiples.
Key Takeaways
- Shifting focus from underperforming Atkins to higher-margin Quest and OWYN products can improve net margins and optimize shelf space.
- Expansion of OWYN’s distribution channels and SKUs offers a substantial opportunity for revenue growth and doubled net sales potential.
- Leadership transition, brand declines, and integration uncertainties pose risks to Simply Good Foods' growth, margins, and profitability amid persistent external pressures.
Catalysts
About Simply Good Foods- A consumer-packaged food and beverage company, engages in the development, marketing, and sale of snacks and meal replacements, and other products in North America and internationally.
- The successful launch and scaling of Quest's salty snacks platform, which has grown to a $300 million business, suggests a long runway for further penetration and growth. This could drive future revenue growth for Simply Good Foods.
- OWYN's strong retail takeaway growth and plans to expand distribution channels and SKUs signal a substantial opportunity to double its net sales in the coming years. This expansion is poised to significantly impact revenue growth.
- The continued success and expansion of Quest's innovation, including the launch of Overload Bars and ready-to-drink Milkshakes, are likely to enhance brand awareness and revenue, particularly as household penetration increases.
- Shifting underperforming Atkins SKUs to higher-margin Quest and OWYN products indicates potential for margin improvement and higher net margins due to more efficient use of shelf space with better-performing products.
- Productivity initiatives and synergy captures from the OWYN acquisition, expected to materialize in fiscal '26, are likely to improve gross margins and adjusted EBITDA, enhancing overall earnings growth potential.
Simply Good Foods Future Earnings and Revenue Growth
Assumptions
How have these above catalysts been quantified?- Analysts are assuming Simply Good Foods's revenue will grow by 4.1% annually over the next 3 years.
- Analysts assume that profit margins will increase from 10.0% today to 12.4% in 3 years time.
- Analysts expect earnings to reach $204.1 million (and earnings per share of $2.02) by about September 2028, up from $145.3 million today.
- In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 22.7x on those 2028 earnings, up from 19.5x today. This future PE is greater than the current PE for the US Food industry at 19.5x.
- Analysts expect the number of shares outstanding to grow by 0.32% per year for the next 3 years.
- To value all of this in today's terms, we will use a discount rate of 6.78%, as per the Simply Wall St company report.
Simply Good Foods Future Earnings Per Share Growth
Risks
What could happen that would invalidate this narrative?- The retirement of CFO Shaun Mara could introduce leadership transition risks, potentially affecting financial stability and strategic decision-making in the short term, impacting earnings.
- Persistent declines in the Atkins brand, which represents 30% of net sales, could continue to drag on overall company growth and margins despite attempts at repositioning and innovation, affecting revenue and profitability.
- The integration and future performance of OWYN remain uncertain, with the need to achieve synergy capture starting in fiscal 2026, posing a potential risk to earnings if delays or integration challenges arise.
- Potential tariff and input cost increases could pressure gross margins, despite mitigation efforts, leading to reduced profitability if costs are not offset by price increases or productivity gains.
- The company's reliance on expanding the physical availability of Quest products into new channels carries execution risk, which, if not successful, may prevent anticipated sales and margin improvements, impacting future revenue growth.
Valuation
How have all the factors above been brought together to estimate a fair value?- The analysts have a consensus price target of $37.7 for Simply Good Foods based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $43.0, and the most bearish reporting a price target of just $32.0.
- In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $1.6 billion, earnings will come to $204.1 million, and it would be trading on a PE ratio of 22.7x, assuming you use a discount rate of 6.8%.
- Given the current share price of $28.15, the analyst price target of $37.7 is 25.3% higher.
- We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.
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Disclaimer
AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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