Snack Stock on the Mend Headed into Earnings

Simply Good Foods is slated to report earnings on Wednesday

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The Simply Good Foods Company (NASDAQ:SMPL) is an American food company. The business produces and sells products such as nutrition bars, ready-to-drink shakes, sweet & salty snacks, and confectionery products. The company’s brand portfolio includes Atkins, Quest, and Atkins Endulge.

On March 18, Simply Good Foods announced that they will report financial results for the second quarter of its fiscal 2021 year on Wednesday, April 7, before the stock market opens. SMPL has outperformed earnings expectations on all four of its most recent earnings reports released. However, that's resulted in only one positive post-earnings move, a 4.7% pop back in July.

For the second quarter of 2020, Simply Good Foods beat analyst estimates by a margin of $0.06 and reported an earnings per share (EPS) of $0.23. For the third quarter of 2020, SMPL increased its EPS to $0.26 and beat expectations by a significant margin of $0.11. For the following quarter, Simply Good Foods posted a decrease in earnings, dropping to $0.22 per share. However, the company still beat estimates by a margin of $0.06. For the first quarter of 2021, SMPL reported an EPS of $0.29 and beat expectations by a margin of $0.08. The company has gone without defeat in the earnings pit lately.

SMPL is up 67% year-over-year, and tagged a record high of $35.25 back on March 11. And while the shares have pulled back some since then, their 80-day moving average has contained the damage. As we normally see with companies growing revenues so quickly, SMPL currently trades at high price-earnings ratio of 50.49 and has a forward price-earnings ratio of 28.65.

In fiscal 2020,Simply Good Foods increased its sales by 56%, or about $290 million, ending with $816 million in total revenues for the year. SMPL has only continued its revenue growth this fiscal year by reporting a 4% year-over-year increase for the first quarter of 2021. More importantly, Simply Good Foods increased its net income by 81% this past quarter.

This significant growth signaled a change to the SMPL net income growth trajectory. The company's net income dropped 27% in fiscal 2020 and was down 50% as compared to fiscal 2018. However, Simply Good Foods net income is now at $62 million in the past 12 months, up from $34.7 million in fiscal 2020. Overall, Simply Good Foods stock is best suited as a long-term growth play.

 

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