Hain Celestial (HAIN) is a healthfood producer. Organic, healthy food is a growth industry, and Hain Celestial has 30 different brands to quench the thirst and satisfy the hunger health conscious consumers have.
Normally food companies are safe havens. They typically don’t grow more than 15% a year, but are good stocks to own during recessions (people gotta eat). HAIN is a bit different. Profits got sucked down in 2009 when the recession hit and stayed down through 2011.
One Year Chart
I love the profit growth HAIN has posted the last four quarters, and feel the stock dropped because growth was “only” 21% last quarter, as it met estimates. HAIN had been growing profits faster than 30% a quarter. In my opinion, 21% growth is good, but the stock had a P/E of around 31 when it was $95 and 21% growth isn’t good enough to keep HAIN flying high like that.
The chart shows a stock that had been on a tear during the last year, so a correction is healthy. Still, I don’t think the stock fell enough. From the look of the chart I would like to see $75 before committing.
Fair Value
Hain Celestial has an estimatesd long-term growth rate of 16% per year. It’s growing around 25% a quarter now. I may be a bit pessimistic here, but I feel 22 times earnings is fair. My Fair Value is $68, but I think $75 would be fine to buy in at.
Sharek’s Take
Hain Celestial has been an excellent investment during the past decade, quadrupling in price. Still, the ten-year returns show a stock that has risen at 14% a year as profit’s have grown 15% a year. That’s good, not great, and I don’t want to overpay. Plus, the hit the stock took this month may lead to a better entry point. I think I may get a change to get this stock at a lower price.
View the Earnings Table here. View the Profit History here. View the Ten Year Chart here.
