Editor’s Note: Below is an abridged excerpt of a recent research note written by Hedgeye Managing Director Howard Penney. If you’re an institutional investor and would like more info on how you can subscribe to Howard’s Restaurants and Consumer Staples research please email sales@hedgeye.com.
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Hain Celestial Group (HAIN) remains on our Best Idea list as a SHORT.
We continue to believe that the company is a collection of brands and businesses that are not deserving of its current premium valuation. The company is only one of a few that participate in the “better-for-you” space, but not all companies are created equal. HAIN’s business model is a risky roll-up story whose better days are in the past.
The most recently reported 4Q15 only confirms this belief. The issues the company faces today are very relevant to the future of the company.
- Business trends and a sum of the part analysis suggest that the UK business is overvalued
- The drive to cut costs increases business risk
- The quality of earnings is the lowest in the Consumer Staples sector
As our analyst team has demonstrated in our past Black Books, HAIN is less than forthcoming with detailed information on how the core business is performing and clearly overstates the positive business trends. This past quarter is just another example of the company hiding what the true organic growth is of the UK business.
