Hain Celestial Quick Analysis
Hain Celestial is one of the leading producers of natural foods, maintaining well-known brands such as Celestial Seasonings, Garden of Eatin’, Health Valley, Arrowhead Mills, Spectrum Naturals, Rice Dream, Soy Dream, and JASON. Hain was founded in 1993 by Irwin Simon, who currently serves as Chairman and CEO.
What to like:
1. Brand portfolio. Hain is unquestionably a leader in the natural foods category, selling to natural food outlets such as Whole Foods Market and increasingly to traditional outlets such as Walmart. Hain has the natural/alternative foods market covered with a variety of known and respected brands.
2. Margin stability and growth. Since 2009, Hain's profit margin has increased and remained stable in the 6.2% region. Over the past several years Hain has shown its ability to increase both revenues and profits, with recent margins significantly improving year-over-year.
3. Experienced management. Irwin Simon has been with Hain since he founded the corporation in 1993, and maintains strong leadership as Chairman and CEO. The CFO and CEO of Hain's U.S. operations have both been with Hain since the early part of last decade. This experienced management team knows the company inside and out, having worked in various portions of the business for approximately 10 years, and has proven commitment to the company.
What to be weary of:
1. Debt. In 2011-12 Hain took on an additional chunk of debt (approximately $160 million). Management has been sufficient addressing debt in the past, and currently the company appears to be paying off debt at the rate of approximately $30 million a quarter. As of the latest quarter, Hain carries $36.15 million of cash on the books with $360.5 million in debt. While I don't doubt management's ability to manage this pile of debt, it is something to closely observe going forward. For the past several years the company has always had 8-10 times more total debt than cash. So long as management can stay on top of the debt and generate sufficient cash flow I don't see much cause for concern.
Let's face it, people are eating healthy these days and are growing increasingly conscious of what they consume. Hain has a presence in the U.S., Canada, and Europe, with an impressive portfolio of brands in the natural foods market. I see this as a solid long-term investment, given the company is currently valued under $3 billion and selling at a P/E less than 30.
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