Simply Good Foods Stock: Strong Cash Flow Poised for a Re-Rating?

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.

Simply Good Foods navigates shifting consumer preferences toward high-protein, low-sugar snacking. Over the past year, its Quest brand grew Q4 FY25 net sales by 13.4%, particularly in salty snacks, while the OWYN acquisition significantly contributed to growth, capitalizing on this trend. However, Q4 FY25 net sales declined 1.8% year-over-year as the Atkins brand faced a 12.9% sales drop and incurred a $60.9 million impairment charge. This led to a Q4 net loss of $12.4 million and projected fiscal 2026 net sales growth of -2% to +2%. Despite short-term margin pressures from inflation, the company actively invests $30-$40 million in salty snack production capacity, reinforcing future growth platforms.

Let’s look at some figures

• Cash Yield: Simply Good Foods offers an impressive cash flow yield of 7.9%.
• 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 35% below 3-month high, 51% below 1-year high, and 54% 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.

Individual stocks can be volatile and shake you out, but strategic allocation and diversification helps you stay invested. Our Boston-based, wealth management partner’s asset allocation approach is designed exactly for that.

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

In summary, we select stocks that have dropped, despite apparently healthy fundamentals, and offer high cash flow yield – so useful to consider, what is the risk?

Risk Quantified

SMPL isn’t immune to big drops. It fell 31% in 2018’s correction, nearly 49% during the Covid crash, and took a 34% hit in the inflation shock. Even with solid fundamentals, these dips show the stock can still suffer major losses when turmoil hits. Good things help, but volatility spares almost no one.

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.

The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – the S&P 500, S&P mid-cap, and Russell 2000 indices. 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.