Key Points
- Simply Good Foods produces high-protein, low-carb and low-sugar snacks and meals under the Adkins and Quest Nutrition brands.
- The company benefits from the GLP-1 weight loss drug trend as dieters take the protein-heavy, low carb and low-sugar snacks and foods to mitigate muscle loss while trimming caloric intake.
- Simply Good experienced 17% YoY revenue growth in its fiscal Q4 2023 quarter.
- 5 stocks we like better than Simply Good Foods
Nutritional food and snacks producer The Simply Good Foods Co. NASDAQ: SMPL has seen its shares rocket higher on the weight-loss medication trend led by Ozempic, Novo Nordisk A/S NYSE: NVO Semaglutide drug. Simply Good is a member of the Consumer Staples sector. GLP-1 medication dieters’ become heavier users of protein shakes and snacks to mitigate muscle loss while reducing caloric intake.
This was a driving factor of the 33% YoY consumption growth of BellRing Brands Inc. (NASDAQ: BRBR) protein bars and powders, maker of PowerBars and Pure Protein shakes. Investors believe it applies the same to Simply Good.
Atkins brand
Simply Good operates two well-known diet food and snack brands: Adkins and Quest Nutrition. Adkins is a science-based food promoting the low-carb lifestyle popularized by the Adkins diet. Its portfolio of products includes ready-to-drink (RTD) shakes, confectionary snacks and frozen meals. It's built a community of like-minded low-carb and low-sugar consumers utilizing website tools, forums and over 1,600 recipes. Check out the sector heatmap on MarketBeat.
Quest Nutrition brand
Simply Good acquired Quest Nutrition for $1 billion in 2019, and the timing was impeccable. Quest bars are easy to find in grocery stores, convenience and health food stores, and gyms. Quest also produces its lines of RTD protein shakes, cookies, chips and pizza. Quest is the growth engine, with retail U.S. takeaway increasing 24% YoY and Adkins falling 4% YoY.
Rise of the GLP-1 Drugs
Social media trends have highlighted the extraordinary weight loss effects of diabetic GLP-1 drugs. Originally used for type-2 diabetes, doctors began prescribing them for off-label use for obesity. Celebrities and social media have popularized the usage of these drugs. Novo has created an obesity-approved Semaglutide drug, Wegovy, created for weight loss. This is a stronger version of Ozempic, which is technically prescribed for type 2 diabetes. Since these are injections, the race for an oral version is heating up, especially as Pfizer Inc. NYSE: PFE threw in the towel on their twice-a-day oral weight-loss pill as at least half the patients were getting too nauseous to take it.
Flexing and pumping profits and growth
On Oct. 24, 2023, Simply Good released its fiscal fourth-quarter 2023 results for the quarter ending August 2023. The company reported an earnings-per-share (EPS) profit of 45 cents versus consensus analyst estimates for a profit of 44 cents, a penny beat. Net income rose to $36.6 million, up from $30.1 million YoY. Adjusted EBITDA rose to $67.3 million, up from $51 million in the year-ago period. Revenues surged 16.9% YoY to $320.42 million, beating analyst estimates of $320.13 million. Gross margins improved to 37.6%, up from 36.7%. The company repurchased $16.4 million of common stock, around $30.11 per share, leaving $71.5 million available under the company's stock buyback plan.
Downside guidance
Simply Good provided fiscal full-year 2024 net sales growth driven by volume between 4% and 6%, or $1.29 billion to $1.32 billion versus $1.33 billion consensus analyst estimates. Adjusted EBITDA is anticipated to increase slightly greater than the net sales growth rate. The company expects solid gross margin expansion and plans to make meaningful investments in marketing and growth initiatives.
Simply Good CEO Geoff Tanner commented, “With low household penetration of about 50%, the category should continue to grow and outperform U.S. packaged foods and snacks driven by the twin tailwinds of snacking and health and wellness. As a category leader, we will continue to invest in our brands and partner with retailers to fuel growth. The foundation for Quest is strong, and it will drive our business and category growth.”
The Simply Good Foods Co. analyst ratings and price targets are at MarketBeat. The Simply Good Foods Co. peers and competitor stocks can be found with the MarketBeat stock screener.
Daily bull flag attempt
The daily candlestick chart for SMPL illustrates a bull flag attempt. The flagpole formed on the parabolic spike after bouncing off the swing low at $31.06 following its fiscal Q4 2023 earnings release on Oct. 24, 2023. Shares spiked through the daily 200-period moving average at $36.55 and then triggered the daily market structure low (MSL) breakout through the $36.87 trigger.
SMPL peaked at $40.00 on Nov. 27, 2023, and proceeded to form a reversion of parallel lower lows and lower highs, forming the flag. The daily candlestick is attempting to break through the upper descending trendline as the daily relative strength index (RSI) bounces back up through the 60-band. Pullback support levels are at $36.87, $34.00, $32.23 and $31.06.
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