Simply Good Foods (NASDAQ:SMPL) Reports Q1 In Line With Expectations, Reaffirms Full Year Guidance

Jabin Bastian /
2024/01/04 7:10 am EST

Packaged food company Simply Good Foods (NASDAQ:SMPL) reported results in line with analysts' expectations in Q1 FY2024, with revenue up 2.6% year on year to $308.7 million. It made a non-GAAP profit of $0.43 per share, improving from its profit of $0.42 per share in the same quarter last year.

Key Takeaways from Simply Good Foods's Q1 Results

This was a quarter with no surprises and the company's management also described the results as "in line" in the earnings release. Revenue and operating margin missed by a bit, but adjusted EBITDA and EPS beat. The company reaffirmed its full year outlook, showing that things are very much on track. The stock is up 1.4% after reporting and currently trades at $40.18 per share.

Is now the time to buy Simply Good Foods? Find out by accessing our full research report, it's free.

Simply Good Foods (SMPL) Q1 FY2024 Highlights:

  • Market Capitalization: $3.95 billion
  • Revenue: $308.7 million vs analyst estimates of $309.3 million (small miss)
  • EPS (non-GAAP): $0.43 vs analyst estimates of $0.42 (3.4% beat)
  • Reaffirmed full year guidance
  • Free Cash Flow of $46.78 million, down 21% from the previous quarter
  • Gross Margin (GAAP): 37.3%, up from 36.9% in the same quarter last year

Best known for its Atkins brand that was inspired by the popular diet of the same name, Simply Good Foods (NASDAQ:SMPL) is a packaged food company whose offerings help customers achieve their healthy eating or weight loss goals.

Packaged Food

As America industrialized and moved away from an agricultural economy, people faced more demands on their time. Packaged foods emerged as a solution offering convenience to the evolving American family, whether it be canned goods, prepared meals, or snacks. Today, Americans seek brands that are high in quality, reliable, and reasonably priced. Furthermore, there's a growing emphasis on health-conscious and sustainable food options. Packaged food stocks are considered resilient investments. People always need to eat, so these companies can enjoy consistent demand as long as they stay on top of changing consumer preferences. The industry spans from multinational corporations to smaller specialized firms and is subject to food safety and labeling regulations.

Sales Growth

Simply Good Foods is a small consumer staples company, which sometimes brings disadvantages compared to larger competitors benefitting from better brand awareness and economies of scale.

As you can see below, the company's annualized revenue growth rate of 11.8% over the last three years was impressive for a consumer staples business.

Simply Good Foods Total Revenue

This quarter, Simply Good Foods's revenue grew 2.6% year on year to $308.7 million, falling short of Wall Street's estimates. Looking ahead, Wall Street expects sales to grow 7.4% over the next 12 months, an acceleration from this quarter.

While most things went back to how they were before the pandemic, a few consumer habits fundamentally changed. One founder-led company is benefiting massively from this shift and is set to beat the market for years to come. The business has grown astonishingly fast, with 40%+ free cash flow margins, and its fundamentals are undoubtedly best-in-class. Still, its total addressable market is so big that the company has room to grow many times in size. You can find it on our platform for free.

Simply Good Foods may not have had the best quarter, but does that create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.

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