SMPL Stock Forecast & Price Target

Simply Good Foods Co. has demonstrated robust revenue growth, particularly through its Quest brand, which doubled in revenue from FY19 to FY23 due to expanded retail distribution and innovative product offerings, ultimately contributing over 55% to overall company revenue in FY23. The company has also achieved significant improvements in gross margin, attributed to deflation in input costs, resulting in a 320 basis point increase in gross margin. Furthermore, the potential for macroeconomic improvements and the anticipated growth from the acquisition of OWYN, as well as strong post-COVID market trends for ready-to-drink shakes, suggest that Simply Good Foods is poised for sustained revenue and profit growth exceeding that of its peers.

Simply Good Foods faces potential challenges that could negatively impact its stock performance, including the anticipated modest decline in EBITDA margins due to the acquisition of the lower-margin OWYN brand and ongoing cocoa inflation which may pressure margins in FY25. Supply chain disruptions coupled with unfavorable minimum volume commitments could hamper revenue and profitability, while mismanagement of inventory could lead to oversupply or undersupply issues, both of which threaten overall financial stability. Additionally, increased promotional efforts may be necessary to maintain market share, potentially eroding profitability, and unsuccessful expansions into new markets could further restrict growth prospects, contributing to a negative outlook on the company’s equity valuation.