Simply Good Foods is today's IBD 50 Stocks To Watch company, as the stock breaks out past a buy point and growth continues for the maker of diet products.
Simply Good Foods is a packaged-food and beverage company headquartered in Denver. The company develops and sells healthy versions of snacks and meal replacements. Simply Good Foods sells its products through two main brands: Atkins and Quest. Atkins helped popularize low-carb diets.
Simply Good Fundamentals
Simply Good Foods has an impressive track record of growth, with a three-year EPS growth rate of 31%. In Simply Good Foods' most recent earnings report, strong results continued. Earnings of 29 cents a share beat analyst projections of 25 cents and marked a 45% increase from a year ago. Net sales increased 16.9% year-over-year to just shy of $260 million. Shares jumped more than 8% Oct. 22 on the news.
With that earnings report, the company also provided its 2022 guidance. Analysts expect growth to continue, albeit at a slower pace. Net sales are forecast to increase from 8% to 10% in 2022. Full-year EPS is projected at $1.40 per share. If this projection is met, it would result in 11% year-over-year growth.
Earnings Due Next Week
Simply Good Foods reports its November-ended quarter's earnings on Jan. 5 before the market opens. Analysts are expecting earnings per share of 34 cents with sales of $265 million, according to FactSet.
It is most likely that earnings will beat these numbers because analysts have consistently lowballed company expectations. Of the past 14 earnings events, 13 have beaten analyst EPS expectations.
This may appear to be a perfect situation to buy shares, but a word of caution: Many of the stock's recent earnings "beats" have resulted in a lower share price. Of the last eight EPS beats, Simply Good Foods has subsequently traded lower on four occasions.
This arises as the market starts to factor in higher expectations than those of company analysts.
Simply Good Foods broke out past a cup base with a buy point of 41.45, per MarketSmith pattern recognition. But most gains vanished, and the stock closed just below the entry.
While a position here can certainly be considered, investing in a stock right before earnings adds uncertainty. For now, it may be best to just consider it a stock to watch.
