This Company Will Make You Look Better Naked

Adam is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

America is tired of being the most obese nation in the world. A renewed focus on fitness has got this country’s citizens shifting gears on their stationary bikes and their eating habits. More and more shoppers now opt for the healthy, organic, natural choice over the processed, trans-fatty, freezer fodder.

Growing at a rate in the low double digits, organic food sales now represent 4.2% of all U.S. food purchases. Prospects for 2013 indicate that sales will continue climbing at a similar rate. With so much market left to capture, I believe there’s one organic health food producer that outshines the rest – Hain Celestial Group (NASDAQ: HAIN).

Strong sales (But not strong enough?)

In its most recent quarter, Hain Celestial increased its revenue 25.5% to $359.8 million. This marks the ninth straight quarter of solid double-digit year-over-year growth in revenue. With strong sales, the company saw profits increase over 57% to $19.8 million or 35 cents per share. Despite this astounding growth, it fell short of analysts’ estimates of 39 cents per share and $405.5 million in revenue.

The earnings miss provides investors who believe the trend in natural and organic health foods will continue for the foreseeable future a good buying opportunity. The sales are strong and growing, and profit margins are improving. Despite the analysts’ forecasts, the company is moving product.

Acquisitions

CEO Irwin Simon has a history of growing the company through small acquisitions. Since 1993, he has made over 30 such purchases, most of which have added substantial strength to the company’s product portfolio.

Hain Celestial recently closed its acquisition of Premier Foods, a U.K. producer of jam, marmalade, peanut butter, honey, and chocolate. The acquisition should help bolster its growing presence in the United Kingdom. In its 2012 fiscal year, the U.K. accounted for 14% of sales compared to just 4% the year prior.

The company also announced plans to acquire raw juice producer BluePrint. Raw juice is marketed as a healthier alternative to pasteurized fruit and vegetable juice. Hain Celestial hopes to take the brand to the next level, and expects the acquisition to improve its bottom line in 2013.

Looking Forward

With a major presence in the growing natural and organic foods market, Hain Celestial should continue growing at this fast pace. The stock has already moved up nearly 60% year-to-date, but I expect the price to climb higher still. With the stock priced at 20 times forward earnings and a PEG around 1.4, the market seems to agree.

As consumers shift toward healthier options, competition will become fiercer. Annie’s (NYSE: BNNY), represents a formidable opponent in the organic foods market. However, with mac and cheese as its best-known product, it still has work to do to convince carb-conscious consumers its brand is a particularly healthy choice. If Annie’s can make a shift from just organic to health conscious, it could cut into Hain’s healthy food sales.

For now, Hain Celestial is the dominant force in health food producers. With its recent dip after earnings, and a more health-conscious consumer in the grocery store, I think now is a good opportunity to buy the stock. Hain Celestial is sure to make your portfolio healthier.


adamlevy has no positions in the stocks mentioned above. The Motley Fool owns shares of Hain Celestial. Motley Fool newsletter services recommend Hain Celestial. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.

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