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3 Reasons Why Hostess Brands Could Be a Sweet Addition to Your Watchlist

TWNK inventory has sound fundamentals and continues to develop market share 

When I used to be first trying round for shares to placed on my watchlist, Hostess Brands (NYSE: TWNK) wasn’t one which got here to thoughts. TWNK inventory is up over 100% for the reason that begin of the pandemic. Most of that development occurred in 2021. Since Hostess Brands doesn’t pay a dividend, I assumed that the corporate would possibly face some powerful comps that may put a ceiling on inventory value development.  


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However, the corporate’s inventory is up 7% in 2022. That’s no small accomplishment with many shares within the purple. And Hostess simply delivered an earnings report during which they beat on the highest and backside strains. But there’s extra. Both numbers had been greater from the identical quarter the prior 12 months.  

This was the corporate’s ninth straight quarter of delivering income development of at the least 9%. And it completed that feat whereas sustaining its margins. My takeaway from that is that the corporate is, to date, in a position to move alongside a few of its rising prices to shoppers.  

Of course, this 12 months greater than most previous performances is not going to be sufficient to excite traders. So listed below are three the reason why I consider TWNK inventory ought to make your watchlist.  

On Pace to Beat the Broader Market 

In instances of market volatility, it’s essential to study the teachings of historical past. And I’m not speaking concerning the previous noticed that over time shares go up. They have and it’s probably that they may once more…sometime. But since we don’t know when sometime can be, what I imply by the teachings of historical past has to do with expectations. 

The previous few years have been unimaginable for market individuals. For instance, the S&P 500 Index was up 47% from the top of 2019 to the top of 2021. And Hostess Brands barely outpaced the S&P 500. TWNK inventory is up 50% in that very same timeframe.  

However, traditionally, if traders can get 10% inventory value development they think about that to be 12 months. This is one thing to remember as institutional traders are repricing the market.  

So far in 2022, Hostess Brands is up 7% for the 12 months. And the consensus estimate means that TWNK inventory could have an upside of 16%. Citigroup (NYSE: C) was the newest analyst to spice up its value goal for Hostess Brands. If the inventory had been to hit Citigroup’s purpose of $28 per share it might mark a 27% improve from present ranges.  

Not Terribly Overvalued 

Over the final two years, it’s turn into trendy for traders to say that “fundamentals don’t matter.” If the current market exercise is proving something it’s that fundamentals will at all times matter. This is an issue for many shares as a result of by conventional metrics many shares stay overvalued. And Hostess isn’t any exception.  

With a price-to-earnings (P/E) ratio of 24.30, Hostess Brands is barely overvalued in comparison with the general sector. However, traders can even see that the corporate’s price-to-book (P/B) ratio (roughly 1.77) is barely beneath the sector common.  

Increasing Market Share 

Hostess Brands was a pandemic winner on the energy of at-home snacking. The firm famous on its current earnings name that this class continues to be elevated. And, 2021 introduced a return of its comfort retailer enterprise that showcases the corporate’s single-serve point-of-sale objects. So it was good to see that within the first quarter of 2022, the corporate’s income and earnings are nonetheless rising.  

And within the firm’s Investor Day presentation in March it introduced that it was persevering with so as to add market share. One cause for this can be that the corporate has comparatively much less publicity to competitors from non-public label manufacturers.  

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