Hain Celestial May Be Flying Too High

After the close on Wednesday, Hain Celestial (HAIN) continued its winning ways. The company reported another strong quarter and the stock tacked on 7%.

Last year at this time I was skeptical. I argued the company is simply a single-digit grower and not worthy of the valuation investors have placed on the shares. Boy, was I wrong! Not including the after hours pop, the stock is up 28% since I wrote about it last year.

HAIN is a triple threat. The company beat Street estimates by $0.03, beat on revenues and raised guidance. Find a company that can say that this season! Fourth quarter revenues grew 32.1% to $463.5 million vs. the estimate of $456.1 million.

For the full year, the company recorded net sales of $1,734.7 million, a 25.9% increase. Earning per share grew 39.3% to $2.41. While sales grew, consolidated operating income decreased 20.28% from $49.8 million to $39.7 million.

During the course of fiscal 2013, the company made three large acquisitions. HAIN acquired Ambient Grocery Brands, which includes Hartley's jams and Sun-Pat peanut butter along with Gale's honey and Robertson's marmalade. HAIN also bought BluePrint, compressed juices, and Ella's Kitchen, a leading organic baby food.

Despite these results, I remain skeptical. I still don't believe British marmalade is a growth strategy. To me, HAIN is one big roll up machine that "grows" by acquisition. I don't think jams and peanut butter brands have much growth. After all, their former companies were vulnerable and ended being acquired by HAIN.

Trading at 25x fiscal 2014 estimates of $2.93, HAIN's shares are expensive. I know analysts have an $80 price target on the stock, but without a deal machine in place, revenue growth will stall out. I'm staying away.

At the time of publication, Laudani had no positions in any stocks mentioned.