A Look at Hawkins (HWKN) Valuation Following Higher Sales and Slight Earnings Dip

Hawkins (HWKN) just delivered its latest earnings report, revealing higher sales for both the second quarter and first half of the year. Net income and earnings per share edged down slightly, and the company announced a new dividend.

See our latest analysis for Hawkins.

After a strong run earlier in the year, Hawkins' shares have pulled back sharply, with a 23% slide over the past month and a 27.9% dip in three months, even as the company posts higher sales and holds steady on its dividend. Despite recent profit-taking, Hawkins' three- and five-year total shareholder returns of 213% and 416% remain outstanding, reminding investors that the long-term momentum is firmly intact.

If Hawkins' mix of resilient growth and returning capital interests you, it might be the right time to broaden your search and discover fast growing stocks with high insider ownership.

After a sharp pullback but solid long-term returns, does Hawkins’ recent dip offer investors a rare bargain, or is the market simply factoring in its next stage of growth?

Price-to-Earnings of 32.1x: Is it justified?

Hawkins trades at a price-to-earnings (P/E) ratio of 32.1x, significantly higher than both its peer average of 24.3x and the U.S. chemicals industry average of 23x. The last close price was $127.91, signaling that investors are paying a premium compared to its direct competitors.

The P/E ratio compares a company's share price with its earnings per share, serving as a shorthand for how much investors are willing to pay for each dollar of earnings. In the chemicals industry, this metric can reflect expectations of future growth, earnings consistency, or perceived stability.

At 32.1x, Hawkins’ P/E suggests the market is pricing in robust future prospects or higher confidence compared to peers. However, this premium appears stretched when compared against both industry norms and the company’s estimated fair P/E of 16.1x. The stock could be overvalued if growth does not accelerate markedly.

The difference between Hawkins’ P/E ratio, the industry average, and its own fair value multiple creates a situation where future price moves could be sharp if sentiment changes.

Explore the SWS fair ratio for Hawkins

Result: Price-to-Earnings of 32.1x (OVERVALUED)

However, slowing annual revenue growth of 6.4% and a 30% discount to analyst price targets pose real risks if expectations do not materialize.

Find out about the key risks to this Hawkins narrative.

Another View: Is DCF Suggesting Better Value?

While the P/E ratio paints Hawkins as expensive versus industry peers, our DCF model arrives at a lower fair value of $98.70 per share. This means the stock trades well above what discounted cash flows suggest it is worth, which challenges the outlook that current optimism is justified.

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Hawkins for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 876 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Hawkins Narrative

If you have your own perspective or want to see the numbers from a fresh angle, you can craft a custom view in just a few minutes, and Do it your way.

A great starting point for your Hawkins research is our analysis highlighting 3 key rewards and 1 important warning sign that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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