Improve Your Portfolio's Health With This Stock
Harsh is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Would you like to invest in a company that sells nutritious food, has enriched its investors’ portfolio by some 90% this year and has the capability of doing better in the future? I think I would get a cheery round of yes for that one. Then wait no further, and get some Hain Celestial (NASDAQ: HAIN) shares for yourself.
Terrific is the word
The company has been on a blazing run, making people healthier, upstaging analyst expectations for a year and making investors’ pockets bulkier. In its recently-reported quarter, Hain’s revenue jumped 22% to $350.8 million while the income metrics turned in a record quarter and a record year, sending its shares to Mars for a rendezvous with Curiosity.
And all of this comes in the midst of a shaky economic climate, which makes Hain’s performance even more delicious. While analysts might think that escalating input costs and premium prices of organic foods could weigh on Hain, one should never undermine the will of a health conscious consumer who wouldn’t mind much paying a bit extra for food that keeps him or her healthy.
Also, Hain managed to keep its gross margin stable in the previous quarter, excluding the Daniels and Europe's Best acquisitions made last year, despite facing headwinds in the form of rising commodity costs. Hain fought cost inflation through its productivity savings, worth $25 million last fiscal year, and improved pricing.
Appetite for More
Going forward, Hain aims to make more people healthy and shareholders wealthy. The company has a great appetite for bolt-on acquisitions, integrating them and expanding its offerings and footprint. It completed three acquisitions last fiscal year - Daniels in the U.K., Cully & Sully in Ireland and Europe's Best in Canada. All these acquisitions, apart from expanding Hain’s geographical presence, added different organic food products to its already strong portfolio.
In addition, the company introduced an army of new products that are expected to drive its top line higher in the future. Also, Hain’s hunger for more acquisitions isn’t satisfied yet it seems. The company has entered into an agreement with Britain’s Premier Foods for buying its sweet spreads and jam business. The deal, which is expected to be sealed by October, further strengthens Hain’s position in the U.K. The company expects the acquisition to become accretive this fiscal year with a contribution of 25 cents towards the bottom line.
Hain knows that consumers are willing to spend on healthy, organic food and it is doing its best to capitalize on this. The company saw sales increase across continents and it expects to do better in the future. Hain is reinforcing its presence in Asia, where it witnessed rapid growth with 26 brands posting gains.
A healthy sector
Management believes that the organic foods market is quite huge and has the potential to grow further. Organic food sales have been on the upswing over the past few years and companies in this sector have recorded impressive gains this year. This fact has hit home by the astronomical performances of Whole Foods Market (NASDAQ: WFM) and Annie's (NYSE: BNNY). Whole Foods has been enjoying terrific growth and posted a 32% jump in profits in its third quarter. Its top line has been growing at a pretty decent clip over the past few years and should carry forward the momentum in the long run as it is a major player in the organic food market.
On the other hand, new boy Annie’s, which went public earlier this year, has already appreciated 16% since its debut and recently posted a healthy quarter. And considering that analysts expect the market for organic food and beverages to exceed $100 billion in the next three years, Annie's would certainly find more room to flex its muscles. It is looking to capitalize on the opportunity by expanding the distribution of its products, introducing innovative products such as the Organic Rising Crust pizza and improving brand awareness.
The takeaway
Hain Celestial has had a terrific run so far and it still has a lot of fuel left in the tank to power its shares higher. The company is growing through a nice blend of organic and inorganic strategies and plies its trade in a booming market. It is cutting down on costs through intelligent savings and improving its earnings power. Moreover, as more and more consumers get health conscious, Hain Celestial’s addressable market will improve further. Keeping all these points in mind, Hain Celestial should contribute towards the health of your portfolio in the future.
TechJunk13 has no positions in the stocks mentioned above. The Motley Fool owns shares of The Hain Celestial Group and Whole Foods Market. Motley Fool newsletter services recommend The Hain Celestial Group and Whole Foods Market. 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.
