On his Mad Money show on CNBC yesterday, stock pundit Jim Cramer promoted recent hot IPO Annie's (Nasdaq: BNNY - News), saying it was a cheaper stock than rival Hain Celestial (Nasdaq: HAIN - News), helping cause a huge spike in the stock today. However, Cramer's analysis of the stock's valuation appears way off base.
Cramer said Annie's, at 23x EPS, was cheaper than Hain at 25x. We don't know if it was just shoddy analysis or purposely misleading (we'll assume the former), but this ignores the fact that for its FY11 (ended in March) the company booked a $5.7 million tax benefit due to a deferred tax valuation allowance release of $11.3 million.
Excluding this $11.3 million one-time item, Annie's reported $8.9 million in net income, or 53 cents per share, based on the shares outstanding, which is lower than what the diluted share amount likely will be. That puts its trailing P/E at around 73.5x, and assuming 39% growth this fiscal year, you get EPS of 74 cents, which puts the FY12 multiple at 53x. Assuming 30% growth in FY13 and you get EPS of 96 cents next year, which puts the FY13 multiple at about 37.5x. In other words, it's not trading anywhere near the 23x multiple (and we're using a favorable share count and robust growth forecasts) Cramer said it was on a trailing or forward basis.
Hain, meanwhile, trades at 34x trailing EPS, 26.5x the 2012 consensus, and 23x the 2013 consensus. While not cheap, it's less expensive than Annie's.
BullMarket.com has recently been taking an in-depth look at organic food stocks, including, Hain's, Annie's, and Whole Foods (Nasdaq: WFM - News), among others.
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- Jim Cramer