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The Hain Celestial Group Inc HAIN

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Morningstar’s Analysis

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No-Moat Hain’s Turnaround Strategy Is Showing Signs of Working, but This Is Already Priced in

Analyst Note

| Rebecca Scheuneman, CFA |

The most notable takeaway from no-moat Hain Celestial’s fiscal second quarter is that the firm’s efforts to drive higher operating margins are exceeding our expectations. Its second-quarter adjusted operating margin increased 330 basis points to 9.1%, ahead of our 8.4% estimate for fiscal 2021. The elimination of low-margin products, divestiture of less profitable businesses, and operating efficiencies lead us to increase our estimated 3-year forward average gross margin by 70 basis points to 26% and our operating margin by 50 basis points to 9.9%. As such, we expect to make a high-single-digit percentage bump to our $31 fair value estimate. Even so, with Hain’s shares trading above our revised intrinsic value, we suggest investors await a more attractive risk/reward.

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Company Profile

Business Description

Hain Celestial makes better-for- you natural and organic consumer products, with 69% of fiscal 2020 revenue considered grocery, 15% snacks, 10% personal care, and 6% tea. Some of the company's most recognized brands are Celestial Seasonings (tea), Terra (chips), Garden of Eatin' (chips), Sensible Portions (snacks), The Greek Gods (yogurt), Earth's Best (baby food and care), and Ella's Kitchen (baby food). The company primarily sells in developed markets, including the U.S. (49% of revenue), U.K. (32%), Canada (8%), and Europe (11%). Its products can be found in traditional grocery stores, natural foods supermarkets, specialty health stores, mass-market retailers, club warehouses, drugstores, convenience stores, and restaurants and e-commerce sites.

1111 Marcus Avenue, Lake Success
New York, NY, 11042
T +1 516 587-5000
Sector Consumer Defensive
Industry Packaged Foods
Most Recent Earnings Dec 31, 2020
Fiscal Year End Jun 30, 2021
Stock Type Slow Growth
Employees 4,287