Has The Recent Rally Left Hershey (HSY) Trading Rich Versus Its Cash Flow Outlook

Simply Wall St.02-23 11:34

If you are wondering whether Hershey's current share price reflects its real value or if the market is mispricing this long-established brand, this article will help you frame that question clearly. ...

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Over the short term, Hershey's shares have seen a 0.4% decline in the last 7 days, a 16.0% return over 30 days, and a 21.6% return year to date, while the 1-year return sits at 32.2% and the 5-year return at 71.7%. Recent moves in the share price sit against a backdrop of ongoing interest in consumer staples companies and how resilient brands fit into portfolios. For a stock like Hershey, that context matters because it can influence how investors weigh perceived stability against the price they are prepared to pay. On our valuation framework, Hershey scores 2 out of 6 on the value checks, which you can see in detail in its valuation score. Next, we will walk through the main valuation approaches behind that before finishing with a broader way to think about what fair value really means for this stock.  Hershey scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown. AdvertisementApproach 1: Hershey Discounted Cash Flow (DCF) Analysis A Discounted Cash Flow, or DCF, model takes Hershey's expected future cash flows and discounts them back to today to estimate what the entire business could be worth right now. Hershey's latest twelve month Free Cash Flow sits at about $1.58b. Using a 2 Stage Free Cash Flow to Equity model, analysts project Free Cash Flow of $1.72b in 2026 and $2.22b by 2028. Beyond the analyst horizon, Simply Wall St extends those projections out to 2035, with discounted cash flow estimates each year to reflect the time value of money. Adding up these discounted cash flows and a terminal value gives an estimated intrinsic value of $299.73 per share. Compared with the current share price, this DCF output suggests Hershey trades at around a 26.0% discount, which points to the stock being undervalued on this model alone. Result: UNDERVALUED Our Discounted Cash Flow (DCF) analysis suggests Hershey is undervalued by 26.0%. Track this in your watchlist or portfolio, or discover 54 more high quality undervalued stocks. HSY Discounted Cash Flow as at Feb 2026 Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Hershey. Approach 2: Hershey Price vs Earnings For profitable companies like Hershey, the P/E ratio is a straightforward way to connect what you pay per share with the earnings the business is generating today. Investors usually accept a higher P/E when they expect stronger earnings growth or see lower risk, and a lower P/E when growth expectations are more modest or the perceived risks are higher. Hershey currently trades on a P/E of 50.89x. That sits above the Food industry average P/E of 24.61x and the peer group average of 43.97x, so on simple comparisons the shares are priced more highly than many competitors. To go a step further, Simply Wall St uses a “Fair Ratio”, which is the P/E level it would expect for Hershey based on factors such as earnings growth, profit margins, industry, market cap and risk profile. Because this Fair Ratio approach adjusts for company specific traits rather than just lining Hershey up against broad industry or peer averages, it can give a more tailored sense of what “normal” looks like. For Hershey, the Fair Ratio is 27.90x, which is below the current P/E of 50.89x, suggesting the shares are trading above what this framework would consider a fair earnings multiple. Result: OVERVALUED NYSE:HSY P/E Ratio as at Feb 2026 P/E ratios tell one story, but what if the real opportunity lies elsewhere? Start investing in legacies, not executives. Discover our 22 top founder-led companies. Upgrade Your Decision Making: Choose your Hershey Narrative Earlier we mentioned that there is an even better way to understand valuation. Let us introduce Narratives, a simple tool on Simply Wall St’s Community page that lets you attach your own story about Hershey’s future to numbers like revenue, earnings, margins and fair value. You can then compare that fair value with the current price, see how different Hershey Narratives can range from a bullish fair value near US$267 to a cautious view closer to about US$160, and watch those views update automatically as new earnings, news and assumptions flow in so you can decide whether today’s price fits your chosen story for the company. For Hershey however, here are previews of two leading Hershey Narratives: 🐂 Hershey Bull Case Fair value in this bullish narrative: US$267.00 Implied discount to that fair value vs the last close of US$221.77: about 17.0% Revenue growth assumption: 4.17% a year  Assumes easing cocoa and tariff costs free up more cash for reinvestment in new products, capacity, and marketing, which supports higher earnings power over time. Leans on Hershey building out snacks beyond chocolate and expanding further internationally so the business is less concentrated in traditional confectionery and North America. Requires confidence that margins can hold up despite input cost and health trend headwinds, and that by 2028 the market will pay a P/E in the high 20s for Hershey.  🐻 Hershey Bear Case Fair value in this bearish narrative: US$159.96 Implied premium to that fair value vs the last close of US$221.77: about 38.6% Revenue growth assumption: 2.91% a year  Emphasizes growing pressure on traditional confectionery from health focused consumers, possible sugar related regulation, and tougher competition from alternative snacks. Highlights the risk that cocoa and tariff costs, ESG requirements, and supply chain issues keep margins under strain even if some cost relief appears in the near term. Questions whether a company that is still heavily anchored in mature markets and indulgent categories should trade much above a lower fair value, even with efforts in salty and better for you snacks.  Putting it together, Hershey’s current price of US$221.77 sits between these two narratives. The key question for you is which story feels closer to how you see the next few years playing out for the business and what you think is a reasonable P/E for that set of outcomes. Curious how numbers become stories that shape markets? Explore Community Narratives Do you think there's more to the story for Hershey? Head over to our Community to see what others are saying! NYSE:HSY 1-Year Stock Price Chart  This article by Simply Wall St is general in nature. We provide commentary based on historical data\n    and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your\n    financial situation. We aim to bring you long-term focused analysis driven by fundamental data.\n    Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.\n    Simply Wall St has no position in any stocks mentioned.Valuation is complex, but we're here to simplify it.Discover if Hershey might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.Access Free AnalysisHave feedback on this article? Concerned about the content? Get in touch with us directly. 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