Last Update 06 Nov 25
Fair value Decreased 16%SMPL: Equity Buybacks And Neutral Ratings Will Support Shareholder Value Ahead
Analysts have lowered their fair value estimate for Simply Good Foods from $35.20 to $29.70. They cite a reduced outlook for revenue growth and sector-wide caution among consumer staples stocks.
Analyst Commentary
Recent analyst updates have reflected a more cautious stance on Simply Good Foods, highlighting factors influencing both the near-term outlook and long-term potential.
Bullish Takeaways- Bullish analysts note that the company is navigating a dynamic environment for U.S. consumer staples, which indicates adaptability in a challenging market.
- The neutral stance from the most recent update suggests that the fundamentals remain intact, even as price targets are adjusted downward.
- Ongoing brand strength and established market presence provide a foundation for recovery if sector trends improve.
- Efforts to optimize execution and refine product offerings are seen as positive moves to support future growth.
- Bearish analysts point to the lowered price target because of reduced visibility into revenue growth over the coming quarters.
- There is increased caution toward valuation within the broader consumer staples sector, which is weighing on short-term sentiment.
- Lingering uncertainty around the upcoming earnings season and sector headwinds is creating additional risk for the company’s near-term performance.
- Execution risk remains a concern, and pressure on margins could potentially impact the company’s ability to meet financial targets.
What's in the News
- The Simply Good Foods Company increased its equity buyback authorization by $150 million, raising the total to $300 million. (Key Developments)
- From June 1, 2025 to October 23, 2025, the company repurchased 890,563 shares for a total of $26.21 million as part of its ongoing buyback program. (Key Developments)
- The company released its fiscal year 2026 outlook, projecting net sales to range between a decrease of 2% and an increase of 2% year-over-year, with gross margins expected to decline by 100 to 150 basis points. (Key Developments)
- Quest Nutrition launched its first-ever donuts, Quest Bake Shop Chocolate Frosted Donuts, which contain 14 grams of protein, 13 grams of fiber, and less than 1 gram of sugar per serving. (Key Developments)
Valuation Changes
- The Fair Value Estimate has fallen from $35.20 to $29.70, reflecting a more cautious outlook and a lower price target for shares.
- The Discount Rate remains unchanged at 6.78%, indicating a consistent approach to evaluating risk and return.
- The Revenue Growth expectation has declined from 3.62% to 2.90%, showing a moderated forecast for top-line expansion.
- The Net Profit Margin has risen slightly from 11.96% to 11.99%, suggesting a marginally stronger profitability outlook despite lower sales growth.
- The Future P/E Ratio has dropped from 21.88x to 18.32x, indicating reduced growth expectations and a lower valuation multiple for the company’s earnings.
Key Takeaways
- Shifting focus from underperforming Atkins to higher-margin Quest and OWYN products can improve net margins and optimize shelf space.
- Expansion of OWYN’s distribution channels and SKUs offers a substantial opportunity for revenue growth and doubled net sales potential.
- Leadership transition, brand declines, and integration uncertainties pose risks to Simply Good Foods' growth, margins, and profitability amid persistent external pressures.
Catalysts
About Simply Good Foods- A consumer-packaged food and beverage company, engages in the development, marketing, and sale of snacks and meal replacements, and other products in North America and internationally.
- The successful launch and scaling of Quest's salty snacks platform, which has grown to a $300 million business, suggests a long runway for further penetration and growth. This could drive future revenue growth for Simply Good Foods.
- OWYN's strong retail takeaway growth and plans to expand distribution channels and SKUs signal a substantial opportunity to double its net sales in the coming years. This expansion is poised to significantly impact revenue growth.
- The continued success and expansion of Quest's innovation, including the launch of Overload Bars and ready-to-drink Milkshakes, are likely to enhance brand awareness and revenue, particularly as household penetration increases.
- Shifting underperforming Atkins SKUs to higher-margin Quest and OWYN products indicates potential for margin improvement and higher net margins due to more efficient use of shelf space with better-performing products.
- Productivity initiatives and synergy captures from the OWYN acquisition, expected to materialize in fiscal '26, are likely to improve gross margins and adjusted EBITDA, enhancing overall earnings growth potential.
Simply Good Foods Future Earnings and Revenue Growth
Assumptions
How have these above catalysts been quantified?- Analysts are assuming Simply Good Foods's revenue will grow by 4.1% annually over the next 3 years.
- Analysts assume that profit margins will increase from 10.0% today to 12.4% in 3 years time.
- Analysts expect earnings to reach $204.1 million (and earnings per share of $2.02) by about September 2028, up from $145.3 million today.
- In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 22.7x on those 2028 earnings, up from 19.5x today. This future PE is greater than the current PE for the US Food industry at 19.5x.
- Analysts expect the number of shares outstanding to grow by 0.32% per year for the next 3 years.
- To value all of this in today's terms, we will use a discount rate of 6.78%, as per the Simply Wall St company report.
Simply Good Foods Future Earnings Per Share Growth
Risks
What could happen that would invalidate this narrative?- The retirement of CFO Shaun Mara could introduce leadership transition risks, potentially affecting financial stability and strategic decision-making in the short term, impacting earnings.
- Persistent declines in the Atkins brand, which represents 30% of net sales, could continue to drag on overall company growth and margins despite attempts at repositioning and innovation, affecting revenue and profitability.
- The integration and future performance of OWYN remain uncertain, with the need to achieve synergy capture starting in fiscal 2026, posing a potential risk to earnings if delays or integration challenges arise.
- Potential tariff and input cost increases could pressure gross margins, despite mitigation efforts, leading to reduced profitability if costs are not offset by price increases or productivity gains.
- The company's reliance on expanding the physical availability of Quest products into new channels carries execution risk, which, if not successful, may prevent anticipated sales and margin improvements, impacting future revenue growth.
Valuation
How have all the factors above been brought together to estimate a fair value?- The analysts have a consensus price target of $37.7 for Simply Good Foods based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $43.0, and the most bearish reporting a price target of just $32.0.
- In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $1.6 billion, earnings will come to $204.1 million, and it would be trading on a PE ratio of 22.7x, assuming you use a discount rate of 6.8%.
- Given the current share price of $28.15, the analyst price target of $37.7 is 25.3% higher.
- We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.
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Disclaimer
AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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