Cash Rich, Low Price – Simply Good Foods Stock to Break Out?
Here is why we think Simply Good Foods (SMPL) stock is worth a look: It is growing, producing cash, and available at a significant valuation discount. Let’s see the numbers.
- Cash Yield: Simply Good Foods offers an impressive cash flow yield of 7.7%.
- Growing: Last 12 month revenue growth of 9.0% means that the cash pile is going to grow.
- Valuation Discount: SMPL stock is currently trading at 33% below 3-month high, 50% below 1-year high, and 53% below 2-year high.
Free Cash Flow Yield refers to free cash flow per share / stock price. Why it matters? If a company produces high amount of cash per share, it can be used to fuel additional revenue growth, or simply paid through dividends or buybacks to shareholders. For quick background, Simply Good Foods provides protein bars, snacks, shakes, frozen meals, and more, distributing consumer packaged food and beverages across diverse retail channels in North America and internationally.
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| SMPL | S&P Median | |
|---|---|---|
| Sector | Consumer Staples | – |
| Industry | Packaged Foods & Meats | – |
| Free Cash Flow Yield | 7.7% | 4.1% |
| Revenue Growth LTM | 9.0% | 5.6% |
| Operating Margin LTM | 15.1% | 18.8% |
| PS Ratio | 1.4 | 3.1 |
| PE Ratio | 19.6 | 23.7 |
| Discount vs 3-Month High | -33.0% | -8.2% |
| Discount vs 1-Year High | -49.5% | -12.5% |
| Discount vs 2-Year High | -52.7% | -14.8% |
But do these numbers tell the full story? Read Buy or Sell SMPL Stock to see if Simply Good Foods still has an edge that holds up under the hood.
The Point? The Market Can Notice, And Reward
The below statistics are from “high FCF yield with growth and discount” selection strategy since 12/31/2016. The stats are calculated based on selections made monthly, and assuming that a stock once picked, can not be re-picked for next 180 days.
- Average 6-month and 12-month forward returns of 25.7% and 57.9% respectively
- Win rate (percentage of picks returning positive) of > 70% for both 6-month and 12-month periods
But Consider The Risk
That said, SMPL isn’t immune to big drops. It plunged about 31% in the 2018 correction, nearly 49% during the Covid crash, and around 34% in the inflation shock. Even with strong fundamentals, these dips show the stock can take a hit when markets turn rough. Good companies get caught up too.
But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read SMPL Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.
Picking winners on a consistent basis is not an easy task – especially given the volatility associated with a single stock. Instead, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming the S&P 500 over the last 4-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.