Last Update 05 Dec 25
SMPL: Share Buybacks And Resilient Snacking Trends Will Support Future Upside
Analysts have reduced their price target on Simply Good Foods by $9 to $27. This reflects a more cautious stance amid expectations for another "dynamic" earnings season in U.S. consumer staples.
Analyst Commentary
Analysts view the new $27 price target as signaling a reset in expectations, aligning valuation more closely with moderating growth prospects and execution risks in the near term.
Bullish Takeaways
- Bullish analysts note that the reduced target still implies modest upside from current levels, suggesting the stock is not viewed as structurally broken.
- They highlight the company’s exposure to resilient snacking and health-conscious consumer trends, which could support steady volume growth even in a choppy macro backdrop.
- There is confidence that management can continue to execute on cost controls and margin initiatives, providing a buffer if top line growth slows.
- Some see room for upside if earnings this season prove less volatile than feared, potentially justifying a rerating from a discounted multiple.
Bearish Takeaways
- Bearish analysts interpret the lower target as a sign that earnings visibility has deteriorated, with the dynamic earnings season adding uncertainty to near term forecasts.
- They caution that growth expectations may have been too optimistic, raising concerns about the company’s ability to sustain premium valuation metrics versus peers.
- Execution risk around navigating shifting consumer spending patterns and promotional intensity is seen as a key overhang on the equity story.
- The Neutral stance on the shares reflects skepticism that catalysts in the upcoming earnings season will be sufficient to drive multiple expansion.
What's in the News
- Increased equity buyback authorization by $150 million on October 21, 2025, bringing the total program size to $300 million (company announcement)
- Completed repurchase of 3,957,571 shares, or about 3.99% of shares outstanding, for $129.34 million under the long running buyback program, including 899,096 shares bought between June 1 and October 23, 2025 (company filing)
- Issued fiscal 2026 outlook calling for net sales between minus 2% and plus 2% year over year and a 100 to 150 basis point decline in gross margin, indicating a cautious operating backdrop (company guidance)
- Quest Nutrition launched Quest Bake Shop Chocolate Frosted Donuts, the brand’s first donut offering, positioned as a high protein, low sugar breakfast and snacking option with 14 grams of protein and less than 1 gram of sugar per serving (product announcement)
Valuation Changes
- Fair Value: Unchanged at approximately $29.70 per share, indicating no material shift in intrinsic value estimates.
- Discount Rate: Edged down slightly from 6.96% to about 6.96%, reflecting a negligible adjustment to the company’s perceived risk profile.
- Revenue Growth: Essentially flat, with projected long term growth holding at around 2.90% year over year.
- Net Profit Margin: Stable at roughly 12.0%, suggesting no meaningful revision to long run profitability assumptions.
- Future P/E: Steady at about 18.4x forward earnings, implying valuation multiples are expected to remain broadly consistent with prior estimates.
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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