Aja Koska
Simply Good Foods (NASDAQ:SMPL) attracted divided analyst opinion on Wednesday.
Needham analyst Matt McGinley took a bullish perspective on the name, initiating coverage of the stock at a Buy rating and assigning the stock a $42 price target. Akin to his bullish outlook for BellRing Brands (BRBR), he highlighted nutritional snacking as an attractive space for the company to continue growing market share within.
“While we expect SMPL’s growth to slow in FY23 versus FY22 as the company faces tough compares, we expect cash flow to improve thanks to lower working capital usage,” he told clients. “This will place SMPL in a stronger position to acquire brands that complement its nutritious snacking portfolio and/ or to utilize cash to retire debt and reduce share count, as we see it.”
By contrast, Cowen called out the company’s lofty valuation ahead of those tough compares as reason enough to remain on the sidelines.
“The company should lap prior year inventory builds during 1H23 which we do not believe are fully factored into consensus,” the firm’s analysts advised. “With the stock trading in line with trailing five-year relative valuation, risk-reward is less compelling here.”
Shares of Simply Good Foods (SMPL) rose 1.08% shortly after Wednesday’s market open.
Dig into the company’s valuation.