HERSHEY CO (HSY) Stock Analysis
HERSHEY CO (HSY) Stock Analysis
Overall Grade: F (Concerning)
View interactive company profile →
HERSHEY CO faces challenges in financial performance that warrant careful analysis.
Key Metrics:
| Metric | Value | Context |
|---|---|---|
| ROIC | 10.8% | Near cost of capital |
| FCF Margin | 15.6% | Strong cash generation |
| Debt/Equity | 1.2x | Moderate leverage |
Investment Thesis: Healthy free cash flow margin of 15.6% provides financial flexibility for growth and shareholder returns.
What is HERSHEY CO's Profitability and ROIC?
HERSHEY CO's return on invested capital of 10.8% is around industry norms. Gross margin of 33.5% with operating margin at 12.3% reflects the company's moderate market position.
Key Metrics
| Metric | Value | Rating | Interpretation |
|---|---|---|---|
| Return on Invested Capital (ROIC) | 10.8% | Adequate | Adequate returns |
| Gross Margin | 33.5% | Good | Competitive pricing environment |
| Operating Margin | 12.3% | Good | Moderate operational efficiency |
How Strong is HERSHEY CO's Cash Flow Quality?
HERSHEY CO generated $1.8B in free cash flow over the trailing twelve months, representing a 15.6% margin. Cash earnings quality is strong, with operating cash flow exceeding net income by 2.6x.
Key Metrics
| Metric | Value | Rating | Interpretation |
|---|---|---|---|
| Free Cash Flow Margin | 15.6% | Good | Excellent cash conversion |
| Free Cash Flow (TTM) | $1.8B | Good | Positive cash generation |
| OCF/Net Income | 2.6x | Excellent | High earnings quality |
| FCF Consistency (8Q) | N/A | Warning | Variable cash flow |
What is HERSHEY CO's Financial Health?
HERSHEY CO's debt-to-equity ratio of 1.2x indicates moderate leverage.
Key Metrics
| Metric | Value | Rating | Interpretation |
|---|---|---|---|
| Debt to Equity | 1.2x | Adequate | Moderate leverage |
| Net Cash Position | $-4.5B | Warning | Net debt position |
Is HERSHEY CO Stock Overvalued or Undervalued?
HERSHEY CO trades at a P/E of 31.4x, representing a premium to the sector median of N/A. Free cash flow yield of 6.6% offers attractive cash returns.
Key Metrics
| Metric | Value | Rating | Interpretation |
|---|---|---|---|
| P/E Ratio | 31.4x | Adequate | Premium valuation |
| EV/Sales | 2.8x | Good | Attractive revenue multiple |
| FCF Yield | 6.6% | Good | Attractive cash return |
| Dividend Yield | 3.9% | Adequate | Meaningful income |
Sector Rankings
| Metric | Value | Percentile | vs Median |
|---|---|---|---|
| Return on Invested Capital (ROIC) | 10.8% | Top 50% | 1.5x above |
| Free Cash Flow Margin | 15.6% | Top 25% | 2.3x above |
| Gross Margin | 33.5% | Top 50% | 1.0x above |
| Operating Margin | 12.3% | Top 50% | 1.6x above |
| P/E Ratio | 31.4x | N/A | - |
Rating Thresholds
Return on Invested Capital (ROIC)
Measures how efficiently a company uses its debt and equity capital to generate profits. ROIC above 15% typically indicates a competitive moat.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | > 20% | Exceptional capital efficiency, strong competitive moat |
| Good | 12% - 20% | Above-average returns, sustainable competitive position |
| Adequate | 8% - 12% | Around cost of capital, moderate competitive position |
| Warning | 4% - 8% | Below cost of capital, value may be eroding |
| Red flag | < 4% | Significant capital destruction, fundamental issues |
Current: 10.8% (Adequate - Top 50% of sector (median: 7.3%))
Free Cash Flow Margin
The percentage of revenue converted to free cash flow. Higher margins indicate stronger cash generation and business quality.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | > 20% | Strong cash generation, high-quality business |
| Good | 10% - 20% | Healthy cash conversion |
| Adequate | 5% - 10% | Moderate cash generation |
| Warning | 0% - 5% | Thin cash margins, capital intensive |
| Red flag | < 0% | Cash burn, potential liquidity concerns |
Current: 15.6% (Good - Top 25% of sector (median: 6.9%))
Gross Margin
Revenue minus cost of goods sold as a percentage. Higher gross margins indicate pricing power and competitive advantage.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | > 50% | Strong pricing power and competitive moat |
| Good | 30% - 50% | Healthy margins, differentiated product |
| Adequate | 20% - 30% | Moderate margins, competitive industry |
| Warning | 10% - 20% | Thin margins, commodity-like business |
| Red flag | < 10% | Very thin margins, structural challenges |
Current: 33.5% (Good - Top 50% of sector (median: 33.3%))
Debt to Equity Ratio
Total debt divided by shareholders' equity. Lower ratios indicate more conservative financing and reduced financial risk.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | < 0.3x | Conservative leverage, strong balance sheet |
| Good | 0.3x - 0.7x | Moderate leverage, healthy financial position |
| Adequate | 0.7x - 1.5x | Elevated leverage, monitor closely |
| Warning | 1.5x - 3.0x | High leverage, increased financial risk |
| Red flag | > 3.0x | Excessive leverage, potential distress risk |
Current: 116.5% (Adequate)
P/E Ratio (Price-to-Earnings)
Stock price divided by earnings per share. Lower P/E may indicate undervaluation, while higher P/E suggests growth expectations.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | < 15x | Attractively valued, potential opportunity |
| Good | 15x - 25x | Fair value for quality company |
| Adequate | 25x - 35x | Growth premium, justify with earnings growth |
| Warning | 35x - 50x | High expectations priced in |
| Red flag | > 50x or negative | Speculative valuation or losses |
Current: 31.4x (Adequate)
Free Cash Flow Yield
Free cash flow per share divided by stock price. Higher FCF yield indicates better cash return relative to valuation.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | > 8% | High cash return, potential value opportunity |
| Good | 5% - 8% | Solid cash yield |
| Adequate | 3% - 5% | Moderate cash return |
| Warning | 1% - 3% | Low cash yield, growth expectations |
| Red flag | < 1% | Minimal cash return to shareholders |
Current: 6.6% (Good)
Frequently Asked Questions
Q: What is HERSHEY CO's Return on Invested Capital (ROIC)?
HERSHEY CO (HSY) has a trailing twelve-month Return on Invested Capital (ROIC) of 10.8%. This compares above the sector median of 7.3%. An ROIC near 8-12% is approximately the cost of capital for most companies.
Q: What is HERSHEY CO's Free Cash Flow Margin?
HERSHEY CO (HSY) has a free cash flow margin of 15.6%, generating $1.8 billion in free cash flow over the trailing twelve months. A FCF margin between 10-20% represents healthy cash generation for most industries.
Q: Is HERSHEY CO stock overvalued or undervalued?
HERSHEY CO (HSY) trades at a P/E ratio of 31.4x, which is above the sector median of N/A. The EV/Sales multiple is 2.8x. Free cash flow yield is 6.6%, which represents an attractive cash return to investors.
Q: Does HERSHEY CO pay a dividend?
HERSHEY CO (HSY) currently pays a dividend yield of 3.9%. Including share buybacks, the total shareholder yield is 3.9%. This yield is moderate, suggesting a balance between income and growth reinvestment.
Q: How much debt does HERSHEY CO have?
HERSHEY CO (HSY) has a debt-to-equity ratio of 1.2x with total debt of $5.4 billion. Net debt position is $4.5 billion.
Q: What is HERSHEY CO's revenue and earnings growth?
HERSHEY CO (HSY) grew revenue by 4.4% year-over-year. Net income declined by 60.2% year-over-year. Modest growth indicates a mature business with stable demand.
Q: How does HERSHEY CO compare to competitors in Consumer Staples?
Compared to other companies in Consumer Staples, HERSHEY CO (HSY) shows: ROIC of 10.8% is above the sector median of 7.3% (Top 39%). FCF margin of 15.6% exceeds the sector median of 6.9% (Top 15% of sector). Gross margin at 33.5% is 0.3 percentage points higher than sector peers. These rankings are based on MetricDuck's analysis of all Consumer Staples companies with available SEC filings.
Q: What warning signs should I watch for with HERSHEY CO?
Investors in HERSHEY CO (HSY) should monitor these potential warning signs: 1) ROIC has been declining, potentially signaling deteriorating competitive position. Regular monitoring of SEC filings and quarterly trends is recommended.
Data Source: Data sourced from 10-Q filed 2025-10-30. TTM metrics as of Q4 2025.
Methodology: Financial metrics calculated from SEC 10-K and 10-Q filings using standardized formulas. Sector comparisons use peer group based on SIC code.
This analysis is for informational purposes only and does not constitute investment advice.