Quick fair-value calculation of Hershey (HSY)

AI Summary

Author calculates a fair-value range of $153–$212 for Hershey (HSY) and views the current $221 price as a premium, preferring to buy nearer $154.

HSY — WATCH The author argues HSY is expensive at $221 versus his calculated fair-value range of $153–$212, based on normalized EPS and a 2026 margin recovery as cocoa costs fall; he would only buy near the lower end of that range. The catalyst is management's guided 30–35% 2026 adjusted EPS growth and expected continued cocoa price declines, while the main stated risk is a crisis scenario that lowers long-term growth to 5%.

Currently HSY at $221 is a premium to my high end fair value of 212. The P/E of 50 is actually more like a P/E of 35, when adjusted for one time items. It is expensive but not excessive, I expect the cocoa prices to continue to fall and the company to earn abnormal profits for the next few years. I would want to buy it nearer to my lower end range of $154 than at the upper limit of $212.

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(this is a quick calculation of the fair value of Hershey $hsy. As a recap, the company experienced margin compression since april 2023 due to the high prices of cocoa. Now that cocoa prices have fallen, i wanted to find out if HSY is expensive to buy since the P/E Ratio is at 50 or is there something else.)

  


    
    Hershey (HSY) FY: End Dec  This Report: FY2025 Today: 22Feb2026
    
    1. SP: 221.77 MCAP: 45Bn  Sales: 1169bn
    2. EPS (diluted): 4.34 (norm): 6.31
    3. Yield (dividend): 2.51% (5YA): 2.12 (Buyback): - (5YA): 0.90%
    4. ROA: 9.45% ROE: 27.76% ROIC: 13.58%
    5. P/E 51.10 (norm): 35.15 (fwd): 30.01 (5ya): 23.86
    6. D/E: 1.24 NetDebt/Ebitda: 2.338 Years
    7. Is average FCF / Net Income > 80%, Yes.
    8. Growth (Past, Stated):
    
    Qtr/YOY          Avg growth    1      3      5     10
    
       6.49          Revenue       4.38   3.92   7.59  4.70
     -38.09          Net Income  -60.24 -18.72  -7.13  5.58
     -38.18          EPS         -60.26 -18.31  -6.61. 6.46
                     Dividend      -     12.26  11.68  9.38
    
    9. etc
    
     Avg.                 1      3      5      10
    
    Net Margin.         7.55  15.43  15.84  14.08
    Inventory Turnover  4.76   4.79   4.89   4.94
    
    10. Growth (Past, Manually Calculated):
    
    Pre-Covid: 2016 to 2019: (5.79/4.41) ^(1/3) -1 = 9.5% CAGR
    Post-Covid:2021 to 2024: ( 9.37/7.18)^(1/3) -1 = 9.3% CAGR
    Whole PeroidL (6.31 / 4.41) ^(1/9) -1 = 4.1%
    
    11. Management Guidance
    
    For 2026,
    
      Sales growth of 4-5%
      Adj EPS growth of 30% to 35% growth
    
    12. Growth (fwd 3-5 years, stated and manually calculated):
    
    a. SA: Stated: 19.07% calculated: (11.82/ 6.31) ^(1/5) -1 = 13.2%
    b. Zacks Stated: 19.08%
    c. DCF Calculated using 6.31 as base: (12.7/6.31)^(1/5) -1 : 15%
    d. Eulerpool calculated,6.31 as base: (12.18/6.31) (1/5)-1: 14.1%

**13. My Fair Value calculation:**

Method i: 2026 will be a recovery year since management says that adj EPS growth will be 30-35%. Then the following 10 years will be a normal growth of 9% assuming no covid and no cocoa inflation (see years 2016 to 2019, 2021 to 2024). A second scenario models a crisis in the 10 years and growth will be 5% (instead of 9%)

End of 2026, EPS will be 1.325% x 6.31 = $8.361

First Scenario ( 9% growth for 10 years) = 27x multiplier, = 27x8.361 = 225.757. Discount back to beginning of 2026 = $207

Second Scenario ( 5% growth for 10 years) = 20x multiplier = 20 x 8.361 = 167.2, discounted back to beggining of 2026 = $153.4

Method ii. I use the middle of the 5 year EPS nos given in step 12, and assume those to be the growth for 5 years, and then i use a 9% and 5% scenarios to cover the next 5 years. Eulerpool EPS of 12.18 represent a CAGR 5 year growth of 14.1%  I will use 14.1% as the growth for the first 5 years.

Base: 6.31

First Scenario:  
Year 1 to 5, growth at 14.1x%  
Year 6 to 10, growth at 9%  
Multiplier: 33.61x  
Fair Value = 33.61 x 6.31 = 212

Second Scenario:  
Year 1 to 5, growth at 14.1x%  
Year 6 to 10, growth at 5%  
Multiplier: 28x  
Fair Value = 28 x 6.31 = 176.7

My fair value calculation ranges from $153 to $212

14. Fair Value from Morningstar is $210, Fair Value from CFRA is 214.61

**Summary** Currently HSY at $221 is a premium to my high end fair value of 212. The P/E of 50 is actually more like a P/E of 35, when adjusted for one time items. It is expensive but not excessive,  I expect the cocoa prices to continue to fall and the company to earn abnormal profits for the next few years. I would want to buy it nearer to my lower end range of $154 than at the upper limit of $212. 

  
See comments for link to the NPV calculator. 

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