Don’t Throw The Hain Celestial Group, Inc. (HAIN), Stuff Your Portfolio With More of It

Impressive cost savings

However, growth won’t come easily and Hain will have to counter rising input costs in the future. But the company seems to have a remedy for that as well. Its productivity process has delivered positive results in the past, as evidenced by a 25% jump in savings in the first half of the current fiscal year. Improved output, in-house production of pouches and optimization of the distribution network have helped Hain Celestial so far and they are expected to deliver in the future as well.

Also, it seems that Hain is able to pass on increased prices to consumers. The drawback of deep cuts in the jam category has been well-received by consumers according to management. They believe that customers aren’t shying away from paying higher prices for organic food.

A justified valuation

Thus, with such opportunity lying ahead, investors shouldn’t become myopic and base their decisions on just one year. Given the fact that Hain Celestial has been enjoying solid growth and has been improving its earnings aggressively, a rich valuation seems justified. Moreover, the stock is cheaper when compared to a smaller player such as Annies Inc (NYSE:BNNY).

Annie’s trades at an even more expensive P/E of 57 times, and doesn’t boast of Hain’s diversified array of products. It’s mainly famous for its organic mac and cheese while Hain had sixteen brands that grew in double digits in the previous quarter. Moreover, falling margins and insider sales have proved to be worrisome for Annie’s and that’s the reason why fellow blogger Adam Levy advises investors to exit the stock.

Final words

The growth of the organic food industry, Hain Celestial’s presence in several important markets, and a proven and effective productivity process are some of the reasons why it seems well-positioned to get better in the future. Hence, Hain investors shouldn’t be basing their decision on a short-term outlook, as the company seems poised for growth in the long run.

The article Don’t Throw This Stock, Stuff Your Portfolio With More of It originally appeared on Fool.com and is written by Harsh Chauhan.

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