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Since last writing about Hain Celestial (HAIN) on March 8, the stock has shot up 10.8% and the majority of that jump was due to a 6.7% hike on March 19, thanks to a segment done the night before by Jim Cramer on his "Mad Money" show and an upgrade to the stock. On that segment Cramer pitted HAIN against Annie's (BNNY), another natural and organic foods producer, where he sided with HAIN. Cramer went into battle with HAIN because he felt that the stock was wrongly sold due to the Glaucus Research article I previously mentioned and came out swinging, saying that JP Morgan (JPM) came out with a note of their own refuting the evidence that Glaucus presented. In addition, HAIN is the larger player and is valued very inexpensively against its competitor. As I mentioned in the previous article, I only took a small bite out of the stock and am very happy with my 10.8% return thus far, but I want to take a fresh look at the organic foods company and see if I want to buy some more now after the run up or wait for a dip in the stock to buy again.

Valuation

At the time of my last article, the stock's trailing twelve month P/E ratio was 22.8 and currently it stands at 25.8, which is to be expected since the P part of the equation has increased 10.8% since that time. The 1-yr forward looking P/E ratio has also increased from 19.14 to 21.66. The PEG ratio has also increased from 1.37 to 1.84 due to the increase in the P/E ratio. I have not seen any upward earnings revisions to allow all these valuation metrics to increase, and this tells me that maybe the stock has shot up maybe a bit too high and a bit too fast.

Technicals

At the time of my previous article the relative strength index had an upward trajectory and was bouncing off of oversold territory while today the RSI is definitely at overbought territory with a value of 68.27 (where a value of 70 is typically considered overbought). Currently the stock is trading 6.3% above its 200-day simple moving average and 3.1% above its first level of support ($60.30) which acted as resistance previously. Current resistance rests at $65.84 which is 5.9% from current levels. The risk of testing the floor of support versus the ceiling of resistance definitely is weighted a bit more to the reward side of things at the current price ($62.17). The moving average convergence-divergence graph also illustrates bullish behavior but shows that it may be leveling off. I'd look for the RSI reaction against the overbought line as my leading indicator to see what the stock is going to do from here.


(Click to enlarge)

Recent News

  1. Longbow Research upgraded the stock from "Neutral" to "Buy" on March 19 with a $73 price target citing their survey of Whole Foods (WFM) and Fresh Market (TFM) which showed positive sales trends within the organic food sector. This upgrade also contributed to the price pop on that day.

Conclusion

I believe the upgrade from Longbow Research and the positive segment on Jim Cramer's show have put a lot of pop into the stock for now, but I don't see anything with respect to valuations nor technicals that make me want to buy the stock right now. I took a small bite into the stock at the beginning of the month and will use that position as my core position to build around if any pullback occurs in the stock. At current levels I will continue to hold my position and if it really does test that next ceiling of resistance at $65.84, I will begin to sell pieces of my position so that I'm not greedy. It's just with no upward earnings revision I think the stock might just be a little long in the tooth here.

Source: Taking A Breather With Hain Celestial