Hain Celestial’s stock price has taken a beating over the past six months, shedding 44.3% of its value and falling to $0.82 per share. This might have investors contemplating their next move.
Is now the time to buy Hain Celestial, or should you be careful about including it in your portfolio? Get the full stock story straight from our expert analysts, it’s free.
Why Do We Think Hain Celestial Will Underperform?
Even with the cheaper entry price, we're swiping left on Hain Celestial for now. Here are three reasons why HAIN doesn't excite us and a stock we'd rather own.
1. Core Business Falling Behind as Organic Sales Decline
When analyzing revenue growth, we care most about organic revenue growth. This metric captures a business’s performance excluding one-time events such as mergers, acquisitions, and divestitures as well as foreign currency fluctuations.
Hain Celestial’s demand has been falling over the last eight quarters, and on average, its organic sales have declined by 6.1% year on year. 
2. EPS Trending Down
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Sadly for Hain Celestial, its EPS declined by 27.7% annually over the last three years, more than its revenue. This tells us the company struggled because its fixed cost base made it difficult to adjust to shrinking demand.
3. High Debt Levels Increase Risk
As long-term investors, the risk we care about most is the permanent loss of capital, which can happen when a company goes bankrupt or raises money from a disadvantaged position. This is separate from short-term stock price volatility, something we are much less bothered by.
Hain Celestial’s $704.7 million of debt exceeds the $68.02 million of cash on its balance sheet. Furthermore, its 7× net-debt-to-EBITDA ratio (based on its EBITDA of $97.54 million over the last 12 months) shows the company is overleveraged.
At this level of debt, incremental borrowing becomes increasingly expensive and credit agencies could downgrade the company’s rating if profitability falls. Hain Celestial could also be backed into a corner if the market turns unexpectedly – a situation we seek to avoid as investors in high-quality companies.
We hope Hain Celestial can improve its balance sheet and remain cautious until it increases its profitability or pays down its debt.
Final Judgment
Hain Celestial doesn’t pass our quality test. Following the recent decline, the stock trades at 38.2× forward P/E (or $0.82 per share). This multiple tells us a lot of good news is priced in - we think there are better opportunities elsewhere. Let us point you toward one of our top digital advertising picks.
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