Packaged food company Simply Good Foods (NASDAQ: SMPL) met Wall Street’s revenue expectations in Q3 CY2025, but sales fell by 1.8% year on year to $369 million. Its non-GAAP profit of $0.46 per share was 3.1% below analysts’ consensus estimates.
Is now the time to buy Simply Good Foods? Find out by accessing our full research report, it’s free for active Edge members.
Simply Good Foods (SMPL) Q3 CY2025 Highlights:
- Revenue: $369 million vs analyst estimates of $367.3 million (1.8% year-on-year decline, in line)
- Adjusted EPS: $0.46 vs analyst expectations of $0.47 (3.1% miss)
- Adjusted EBITDA: $66.24 million vs analyst estimates of $69.08 million (17.9% margin, 4.1% miss)
- Operating Margin: -3.2%, down from 12.7% in the same quarter last year
- Free Cash Flow Margin: 7.4%, down from 12% in the same quarter last year
- Market Capitalization: $2.51 billion
“Fiscal year 2025 finished with solid results, with net sales up 9% on a reported basis and 3% Adjusted EBITDA growth. Organic net sales grew 3%, driven by continued strong double-digit consumption for both Quest and OWYN. We largely completed the integration of OWYN, invested meaningfully in our brands and capabilities despite inflationary pressures, and leveraged our strong cash flow to improve our balance sheet and return cash to shareholders," said Geoff Tanner, President and Chief Executive Officer of Simply Good Foods.
Company Overview
Best known for its Atkins brand that was inspired by the popular diet of the same name, Simply Good Foods (NASDAQ: SMPL) is a packaged food company whose offerings help customers achieve their healthy eating or weight loss goals.
Revenue Growth
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but many enduring ones grow for years.
With $1.45 billion in revenue over the past 12 months, Simply Good Foods is a small consumer staples company, which sometimes brings disadvantages compared to larger competitors benefiting from economies of scale and negotiating leverage with retailers. On the bright side, it can grow faster because it has a longer list of untapped store chains to sell into.
As you can see below, Simply Good Foods’s sales grew at a decent 7.5% compounded annual growth rate over the last three years. This shows its offerings generated slightly more demand than the average consumer staples company, a useful starting point for our analysis.
This quarter, Simply Good Foods reported a rather uninspiring 1.8% year-on-year revenue decline to $369 million of revenue, in line with Wall Street’s estimates.
Looking ahead, sell-side analysts expect revenue to grow 2.5% over the next 12 months, a deceleration versus the last three years. This projection is underwhelming and implies its products will see some demand headwinds.
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Cash Is King
Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
Simply Good Foods has shown terrific cash profitability, driven by its lucrative business model that enables it to reinvest, return capital to investors, and stay ahead of the competition. The company’s free cash flow margin was among the best in the consumer staples sector, averaging 13.2% over the last two years.
Taking a step back, we can see that Simply Good Foods’s margin dropped by 4.9 percentage points over the last year. Continued declines could signal it is in the middle of an investment cycle.
Simply Good Foods’s free cash flow clocked in at $27.34 million in Q3, equivalent to a 7.4% margin. The company’s cash profitability regressed as it was 4.6 percentage points lower than in the same quarter last year, suggesting its historical struggles have dragged on.
Key Takeaways from Simply Good Foods’s Q3 Results
We struggled to find many positives in these results. Its EBITDA missed and its gross margin fell short of Wall Street’s estimates. Overall, this quarter could have been better. The stock traded down 5.4% to $23.61 immediately following the results.
Simply Good Foods underperformed this quarter, but does that create an opportunity to invest right now? We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free for active Edge members.
