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Investing In Health Food Sales Earnings Growth - HAIN

|Includes: BGS, CVGW, GIS, The Hain Celestial Group, Inc. (HAIN), HRL, JJSF, LANC, MKC, PF, SJM, TSN
Hain Celestial Health Food

Hain Celestial Is a Natural Investment Choice Again By The Street

The organic food company's risk-reward ratio is now more positive.

Shares of organic and natural products distributor Hain Celestial (NASDAQ:HAIN) has gotten punished over the past month, falling more than 31% because the company last month delayed its annual filing and issued a weak outlook.

The reason for the delay? The Lake Success, N.Y.-based company said it was investigating certain revenue arrangements with distributors. During the fourth quarter, Hain said it identified "concessions that were granted to certain distributors in the United States." As a result, Hain wants more time to evaluate whether it correctly accounted for those revenue and said it wants to assess its internal controls over financial reporting.

While the accounting issues are worrisome, the 30% plunge the stock has taken seems overdone. Purely from a risk-reward perspective, now's the time buy HAIN and hold for the next 12 to 18 months. Despite the massive drop, Hain Celestial shares, at around $36, are trading some 8% above its 52-week low of $33.12, which suggests the stock might have already bottomed.

The shares should bounce back once the accounting issues are cleared up. The accounting issues aside, Hain still has a strong business and remains a solid play consumers driving towards healthier living. Thanks to its strategic M&A track record, Hain has built itself into a leading organic-food position and should command a premium to its peers.

With the 40% decline from its 52-week high of $59.74, HAIN is now priced at just 16 times fiscal 2017 estimates of $2.15 per share. This is about four points below where the organic category has traded. This means, when applying a 20-point multiple to the 2017 estimates of $2.15, it yields a stock price of around $43, or 20% premium above Hain's closing price on Friday of $35.77.

It's likely for this reason, HAIN has a consensus buy rating and an average analysts 12-month price target of $44.50. Given these factors, including the likelihood that Hain may find nothing from its internal investigation, the risk-reward ratio has turned positive and you should be a buyer at current levels.

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