HERSHEY CO/THE (NYSE:HSY): A Quality Investment with Strong Fundamentals and Lasting Competitive Edge

The Caviar Cruise stock screener helps find high-quality companies ideal for long-term investment, following principles of quality investing. This approach looks for firms with solid profitability, steady growth, smart capital use, and lasting competitive edges. The screen checks measures like revenue and EBIT growth, return on invested capital (ROIC), debt stability, and profit quality to pick companies that show strength and strong operations.

One company that fits these strict standards is The Hershey Co. (NYSE:HSY). Hershey, a top confectionery and snack maker, has shown solid fundamentals that match the Caviar Cruise approach.

Key Metrics That Highlight Hershey as a Quality Investment

1. Solid Revenue and EBIT Growth

• Revenue Growth (5Y CAGR): 2.87%
• EBIT Growth (5Y CAGR): 11.34%

While Hershey’s revenue growth is steady, its EBIT growth is much higher than sales growth, a sign of better profitability. This points to operational efficiency, pricing strength, or cost savings, all marks of a strong business.

2. High Return on Invested Capital (ROIC)

• ROIC (Excluding Cash & Goodwill): 38.44%

A high ROIC shows Hershey earns strong returns from its investments, well above the 15% target set by the Caviar Cruise screen. This metric highlights management’s skill in using capital wisely, a key factor for long-term growth.

3. Manageable Debt Levels

• Debt-to-Free Cash Flow Ratio: 3.57

Hershey’s debt is comfortably covered by its free cash flow, meaning the company could pay off its debt in less than four years with current cash flows. This conservative debt level lowers financial risk, an important factor for quality investors.

4. Strong Profit Quality

• 5-Year Average Profit Quality (FCF/Net Income): 97.13%

Profit quality measures how well earnings turn into free cash flow. Hershey’s near-100% ratio shows almost all reported profits are backed by real cash, reducing worries about accounting issues.

Fundamental Analysis Summary

Hershey’s fundamental report outlines its strengths and weaknesses:

• Profitability (Score: 9/10): Outstanding margins (Operating Margin: 19.49%) and high ROIC put Hershey among the best in its industry.
• Financial Health (Score: 6/10): While debt is under control, the company’s liquidity measures (Quick Ratio: 0.89) suggest some short-term limits.
• Valuation (Score: 3/10): Hershey trades at a premium (P/E: 22.68), which may not appeal to value-focused investors, but quality investors often pay more for top-tier businesses.
• Growth (Score: 3/10): Future revenue and earnings growth are expected to be slow, but Hershey’s stability and profitability make up for this.

Why Hershey Matches the Quality Investing Approach

The Caviar Cruise method favors companies with lasting competitive edges, reliable cash flow, and smart capital use—all traits Hershey has. Its strong brands (Hershey’s, Reese’s, Kit Kat) give it pricing power, while its global reach and recession-resistant products add stability.

For investors looking for more quality stocks, the full Caviar Cruise screen results offer more options.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Investors should conduct their own research or consult a financial advisor before making decisions.