Hain Celestial Group Inc. (NASDAQ: HAIN) is taking it on the chin on Monday after Barron's highlighted some growing risks over the holiday weekend. While we might normally be inclined to disagree with this outlook, there are some very serious concerns.

Barron's showed that the growth rate may be very hard to sustain for what is already a very pricey stock. If you use the Thomson Reuters consensus estimates and Friday's closing price of $62.20, the forward earnings multiples are 25.7-times for the fiscal June 2013 year and 21.8-times the fiscal June-2014 estimates.

The two issues Barron's highlighted were stronger or growing competition and the ability to sustain the company's past acquisition pace. As it stands now, the analysts are already looking for sales and earnings growth. Acquisitions may alter that, but this is the consensus for now.

The problem here is that the consensus target of $70.64 is less than the recent highs. The consensus analyst group implies that the stock has became fully priced. History has shown over and over that stocks often take a beating when the underlying company's growth rates of the past become hard to match. Unfortunately, that can sometimes happen even if companies manage to meet their growth rate expectations. Hain Celestial may be down from its peak, but if you did not take a market sell-off into consideration, this still feels like a situation where it is priced for perfection.

Hain now is worth about $2.8 billion, and the $62.20 price compares to a 52-week range of $33.72 to $73.72. The most recent bounce is still not incredibly strong when you consider that the high was seen in early September and shares fell under $58 by the end of October. Keep in mind that this stock has more than tripled in the past two and a half years and the gains from the lows of the recession have been more than 300%.

Based on the concerns brought up, this stock is down 2.8% at $60.41 so far on Monday.

JON C. OGG


Filed under: 24/7 Wall St. Wire, Food, Retail Tagged: HAIN

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