Investing in the Sweet Spot: Is Hershey Stock a Good Buy Right Now?

Innerly Team News 3 min
Hershey stock analysis: Evaluating long-term investment potential amidst high cocoa prices and market volatility. Financial metrics and ethical considerations included.

Alright folks, let’s talk about Hershey and why it might be the perfect time to add some chocolate to your portfolio. With the stock hitting a three-year low, it’s hard not to wonder if this is the sweet deal we’ve been waiting for. The company has been around since 1894 and is iconic in the American landscape.

Price Volatility and Cocoa Prices

Now, I won’t sugarcoat it. The recent spike in cocoa prices has caused some ripples. Hershey’s stock is down 37% from its all-time high in 2023, and it’s down 20% from 2022 support levels. Talk about a rollercoaster! But you know what they say—buy low, sell high. This dip could actually be the opening our wallets have been looking for.

Financials That Speak Volumes

Let’s take a solid look at the numbers, shall we? Despite the current market noise, Hershey has been on a steady growth path in profit, revenue, and cash flow over the last decade. Here’s a few highlights for your consideration:

  • The stock is trading at a modest P/E ratio of 19, down from a 10-year median of 25. Seems like a good deal, right?
  • Free cash flow has been growing at a whopping average rate of 17% per year for the last decade.
  • A median net profit margin of 14.76% shows they know how to keep the lights on.

And let’s not forget the debt-to-equity ratio, which is looking pretty lean at 1.6 compared to the 10-year median of 2.56.

A Dividend for the Ages

Hershey serves up a dividend yield of 3.19% right now. That’s a nice little cherry on top for investors who appreciate a steady stream of income. It’s not just candy; it’s cold hard cash for those who decide to hold it long-term.

The Mondelez Rumor Mill

Oh, and did you hear the rumor that Mondelez might want to buy Hershey? The Hershey Trust Company, which holds a significant stake in the company, has twice voted against it. The latest one was in 2016. So, that’s a no from me, dawg.

Sweet Brand Portfolio

Hershey owns some of the biggest names in the candy aisle—Reese’s, Kit Kat, Jolly Rancher, and more. These brands are not just cute names; they’re well-loved products that keep folks coming back for more. This brand strength means steady demand, even in tough times.

Ethical Considerations

Let’s also remember, Hershey has some deep roots in social responsibility. The Milton Hershey School Trust is no small potatoes, with $17.4 billion as of 2021. They fund a private boarding school for low-income families. And that’s not all—there are other trusts like the M.S. Hershey Foundation Trust and the Hershey Cemetery Perpetual Care Maintenance Trust.

Final Thoughts

In a nutshell, Hershey’s current stock price is like a candy bar on sale—an opportunity for stable, long-term growth. Yes, the cocoa prices are a bit high right now, but the company’s financial health, consistent dividend yield, strong brands, and ethical practices are all the reasons you need to consider this one.

If you’ve been looking to add a sweet touch to your investment portfolio, Hershey could be it.

The author does not own or have any interest in the securities discussed in the article.