Savings and more
Looking ahead, the company aims to record $40 million to $50 million in productivity savings in the current fiscal year. Hain was able to record an improvement of 40 basis points in gross margin in the previous quarter. With higher productivity savings expected in the future, margins might expand further.
Another advantage for Hain Celestial is the ever expanding network of its distributors such as United Natural Foods and grocers such as Whole Foods Market, Inc. (NASDAQ:WFM).
Whole Foods Market, Inc. (NASDAQ:WFM) recently expanded into three markets and sees demand for 1,000 stores in the U.S., up from 355 stores at present. Moreover, Whole Foods Market, Inc. (NASDAQ:WFM) has signed 50 new leases over the past year, taking total signed leases to 94. What this essentially means is that Whole Foods Market, Inc. (NASDAQ:WFM) has got enough sites to open stores going forward and also signifies the company’s ambition to grow. To be more precise, Whole Foods Market, Inc. (NASDAQ:WFM) states that it has “nearly a three-year supply of new stores.”
Such expansions on the part of carriers of Hain’s products should undoubtedly help the company grow. What’s even more enticing is that at a forward P/E of 23, Hain Celestial looks like a good bet given that its earnings are expected to grow 20% this year and 14% in the next fiscal year. But these estimates might move higher in the future considering the opportunity in the industry, Hain’s cost control measures, and expansion across the globe.
A better play
On a trailing P/E basis as well, Hain’s multiple of 33x is well below peer Annies Inc (NYSE:BNNY) 72x. On a forward basis, Annies Inc (NYSE:BNNY)’s multiple comes down to 38, still more expensive than Hain. Moreover, Annies Inc (NYSE:BNNY)’s performance wasn’t great in the previous quarter. It missed estimates on both top and bottom lines as revenue grew just 14% from the year-ago period to $39 million and earnings were flat.
However, Annies Inc (NYSE:BNNY)’s expects sales to grow 18% to 20% this fiscal year. This looks impressive, but given Annies Inc (NYSE:BNNY)’s rich valuation, Hain has a better risk-return profile since it is geographically diversified and has well-established brands.
Hain Celestial’s performance has been outstanding this year and looking at the company’s initiatives and expected growth in the organic food market, it should continue to perform well.
The article 3 Great Reasons To Buy This Organic Food Company originally appeared on Fool.com is written by Harsh Chauhan.
Harsh Chauhan has no position in any stocks mentioned. The Motley Fool recommends Hain Celestial and Whole Foods Market. The Motley Fool owns shares of Hain Celestial and Whole Foods Market.
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