Hain Celestial Delivers Strong Growth And Clear Initiatives

Aug.22.14 | About: The Hain (HAIN)

Summary

Hain is another winner in the natural and organic foods category.

Multiple factors are driving continued growth.

The stock is closing in on a 52-week high.

As consumers allocate more money toward heather food products Hain Celestial (NASDAQ:HAIN) is well positioned to benefit. The company is a leading natural and organic food and personal care products company in the U.S. and Europe. They participate in a wide variety of product categories and market well-known brands including Celestial Seasonings, Garden of Eatin', Soy Dream, Rice Dream and many others.

HAIN recently released Q4 results which exceeded analyst views and expects 'huge growth" during the next three years as they expand online. The company's broad based retail strategies has products place beyond traditional retail and are now found in 7-Eleven, college campuses, and fast casual chains like Chipotle (NYSE:CMG). During Wednesday's conference call CEO Irwin Simon said he wants his products sold "wherever there's a cash register" and is in the process of building out staff to drive more online sales. Amazon is already a top 10 account for the company.

That company has been growing sales and earnings fast. Here is a look at sales & earnings growth over the last 4 quarters and annual earnings over the last 3 years.

Sales Growth Last 4 Qtrs Latest Qtr. 2-Qs Back 3-Qs Back 4-Qs Back
HAIN 26% 22% 17% 33%
Click to enlarge

Source - Marketsmith

Earnings growth has been equally impressive during the last year and annually the last three years.

EPS Growth Last 4 Qtrs Latest Qtr. 2-Qs Back 3-Qs Back 4-Qs Back
HAIN 38% 22% 18% 27%
Ann. EPS Growth Last 3 Years Current Year 1 Year Back 2 Years Back
HAIN 49% 36% 36%
Click to enlarge

Source - Marketsmith

The company expects 2015 earnings between $3.72-3.90 a share, with the midpoint 8 cents above consensus estimates of $3.72.

Here's a look at some of Hain's big-picture numbers.

8/21/14 HAIN
Current P/E Ratio 30
Market Cap $4.8Bil
Price % Change Last 12 Months 31%
Sales Ttl Last 4 Qtrs $2.15Bil
EPS Ttl Last 4 Qtrs $3.17
Next Year EPS Estimates $3.76
Next Year EPS Estimates Growth Rate 19%
Click to enlarge

Source - Marketsmith

Here are a few other company metrics worth noting.

8/21/14 HAIN
Return on Equity 11%
Debt Level 54%
% R&D N/A
Annual Pre-Tax Margin 10.1
Cash Flow Vs. EPS % Last Year 0.70%
Click to enlarge

Source - Market Smith

The ROE of 11% is below what I would like to see for a high-growth stock and may be the result of shareholder delusion from acquisitions. Cash flow is also on the light side and ideally would be 20% higher than EPS.

HAIN is very bullish on their online growth prospects and expects online sales will be a huge growth factor for the next few years. They have recently created a social media team charged with building awareness around its brands and increasing staff for digital sales and advertising.

The company also plans to continue making acquisitions having closed 10 deals in the last 4 years. "We expect HAIN to actively participate in industry consolidation as it expands both in distribution within existing and new customers and into perishable food categories," said S&P Capital IQ analyst Joe Angese in a research note Wednesday.

The future looks good for HAIN if they can continue to deliver numbers like these:

8/21/14 HAIN
EPS Growth Rate 28%
Earnings Stability 10
Funds % Increase 3.6%
Click to enlarge

Source - Marketsmith

EPS growth is most often the primary contributor to the returns associated with high-growth stocks. An earnings stability of 10 indicates the company has been reasonably consistent in delivering earnings. Maybe most important, more institutional investors are taking a position in HAIN.

Momentum in the organic and natural food category appears strong and HAIN has done a good job of capturing this growth as well as line up new initiatives and opportunities. HAIN has been trading sideways since spring and is just shy of making a fresh 52-week high which might mark a good entry point.

No investment recommendations have been made in this article. Investing involves risk including the loss of capital. Conduct your own research before making any investment decision.

Data Definitions

Return on Equity: The amount of net income returned as a percentage of shareholders' equity.

Debt Level: Calculated by dividing debt by shareholders' equity.

Annual Pre-Tax Margin: Calculated by dividing annual operating income by sales.

Cash Flow Vs. EPS % Last Year: Percentage difference between operating cash flow per share vs. earnings per share from the last completed fiscal year.

EPS Growth Rate: The compound growth rate using the least squared fit over the latest two to three year's earnings per share on a running 12-month basis.

Earnings Stability: Indicates in percentage from one standard deviation of the variability around the trend line fitted through 3 to 5 years of earnings history with a scale ranging from 1 to 99. Lower numbers represent more stable company earnings history.

Funds % Increase: Represents the % change in the number of mutual funds owning a company's stock vs. the previous quarter.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it. The author has no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Information from an Investor's Business Daily article on Thursday, August 21, was referenced.