A Stock in Pullback Mode Which You Should Consider Buying

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

Shares of natural and organic food company Hain Celestial (NASDAQ: HAIN) have been in a soup over the last three months, witnessing a pullback of around 19%. There have been concerns whether Hain’s impressive growth story can continue, as highlighted in a Barron’s cover story late last month.

However, Founder and CEO Irwin Simon firmly believes in his company’s prospects and fired back at Barron’s in a CNBC interview, citing the huge addressable market Hain’s brands have and why the company shouldn’t be tied to a multiple. The stock might be expensive when stacked up against peers, but there are some solid reasons why Fool analyst Alyce Lomax decided to put some real money into the stock for Fool.com and Carl Icahn has been building up his Hain position.    

Consistently Solid

And even I believe that Hain’s growth story is here to stay. It might be enduring a bit of pain now as far as the stock price is concerned, but the company isn’t showing any signs of slowing down yet. Its revenue and earnings have been on a blistering run over the last two years, propelled by a mixture of acquisitions, solid products, and growth in health-conscious customers.

<img src="http://media.ycharts.com/charts/c925c4f8a478aa73e2323dffe24090d9.png" />

HAIN Revenue TTM data by YCharts

Going forward, I believe Hain Celestial can get even better. Thirteen of its brands exhibited double-digit growth in the previous quarter, which means that Hain has a pretty solid portfolio. In comparison, its competitor, Annie’s (NYSE: BNNY), depends on its organic mac and cheese product and hence, lacks Hain’s luxury of diversified brands. Moreover, Annie’s fall from grace has been spectacular over the last few months as insider sales have shot up and it’s facing stiff competition.

Impressive Diversification

Apart from brands, Hain’s geographical diversification is another reason why potential investors would love it. Its geographical footprint spans the U.S., Canada, the U.K., Asia and China among others. More importantly, Hain Celestial is witnessing decent pace of growth in almost all its markets. Its presence across a wide range of markets is a big plus, as the global organic food industry is expected to be worth in excess of $100 billion by 2015.

As more consumers around the world decide to improve their health and take to organic food, Hain will find a huge playing field in front of it. Its existence across continents should support its growth in the future.

A Growing Portfolio

Hain Celestial has relied on acquisitions a lot to drive its growth, and in my opinion it is correct in doing so. Acquisitions have enabled Hain to build up its impressive array of brands across countries, and it announced one more last month. Hain intends to acquire BluePrint, a brand that sells raw juice, juice cleanses and other organic products. This acquisition will start contributing to Hain’s earnings this fiscal year, but more importantly, the BluePrint acquisition would add a new line of products to Hain’s portfolio that would serve a new audience.

Also, Hain’s products sell through a wide network involving distributors, supermarkets and discount retailers. Its products are sold through grocers such as Whole Foods Market (NASDAQ: WFM), Safeway and Kroger. Whole Foods’ stores across the U.S., Canada, and the U.K. give Hain access to a large number of customers. Moreover, Whole Foods has exhibited consistent improvement in same-store sales over the past three years and sees potential to expand its stores in the U.S. to 1,000.

This means that Hain will find more avenues to grow its sales in the future as supermarkets and discounters such as Whole Foods and Wal-Mart build more stores.

The Bottom Line

Its current price-to-earnings multiple of around 32 might seem too heavy at the moment, but analysts expect the company to deliver impressive earnings growth going forward, leading to a more decent forward P/E of about 20. The company is one of the best ways to play the booming organic food market and I believe that Hain Celestial’s pullback opens up a good entry point into a company which is delivering consistent growth and has room to run higher.

TechJunk13 has no positions in the stocks mentioned above. The Motley Fool owns shares of Hain Celestial and Whole Foods Market. Motley Fool newsletter services recommend Hain Celestial 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. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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