As low-carb diets gain in popularity, healthy snack maker Simply Good Foods Co. (SMPL) may be cooking up a tasty breakout. The owner of the Atkins and SimplyProtein brands is currently within 1% of a new buy zone.
XThe Atkins low-carb diet, named after physician Robert Atkins, focuses on eating mostly protein and fat, while restricting the intake of carbohydrates. In 2017, Simply Good Foods was created by the combination of Conyers Park Acquisition and Atkins Nutritional.
The SimplyProtein brand was launched in 2002 and marketed by Wellness Foods USA, a subsidiary of Simply Good Foods. SimplyProtein makes protein bars that are Non-GMO Project Verified, gluten free, and contain no artificial sweeteners, preservatives, flavors or colors.
Low-Carb Diet Craze May Drive Fat Profits
Simply Good Foods shares the No. 2 ranking within the food preparation group with McCormick & Co. (MKC). Both companies have a 93 Composite Rating. McCormick & Co. (MKCV), which is the class of McCormick shares with voting rights, earns the top spot with its 97 rating. The group ranks No. 29 out of 197 industries.
On Jan. 3, Simply Good Foods posted 29% earnings growth for its fiscal 2019 first quarter, ended Nov. 24, 2018. For fiscal Q2, analyst expect EPS to rise 62%. Full-year analyst estimates for both fiscal 2019 (26%) and fiscal 2020 (10%) were recently revised higher.
The Denver-based company generated $431 million in revenue in fiscal 2018, ended Aug. 25. In fiscal 2019 Q1, Simply Good Foods posted $121 million in sales, a 13% increase over the year-ago quarter.
Signs of institutional demand for shares include a 1.3 up/down volume ratio and five quarters of rising fund ownership. Fidelity Contrafund (FCNTX) and eight funds with an A+ rating have a position in the stock.
Will Healthy Snacks Lead To Healthy Breakout?
Conyers Park Acquisition went public in 2016, under the symbol CPAA. After combining with Atkins Nutritional to create Simply Good Foods, the stock began trading under the SMPL ticker in 2017.
As is often the case with new IPOs, it took some time for the stock to get going. After a long stretch of tight, essentially sideways trading, Simply Good Foods formed a 26-week-long consolidation from January to July 2018.
After clearing the 16.11 buy point in July, the stock rose over 30% before pulling back in December. Simply Good Foods is up nearly 1% Friday morning, putting it within 2% of a 21.13 buy point in a third-stage base.
The base could also be interpreted as a cup with handle showing an earlier 20.96 entry. But note the wedging in the handle. Time will tell, but such action can indicate a flawed chart pattern.
The relative strength line is at a new 52-week high ahead of a potential breakout, a sign of market-leading strength. In another indicator of a technical rebound, the shorter-term 10-day line has climbed back above the longer-term 50-day moving average. The 20-day line may also soon retake the 50-day moving average.
See if Simply Good Foods can power through the entry in volume at least 40% above average.
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