Hershey stock is trading near an all-time high, it’s up 38 percent this year and on pace to beat the Standard & Poor’s 500 index for a fourth consecutive year. Although it has been sweet for investors, a growing number of analysts say all the good news is reﬂected in the stock price and forecast smaller gains ahead.
To be sure, even the skeptics acknowledge all that’s gone right for the maker of Twizzlers and Kit Kat. The company reported stronger-than-expected results last week: Its earnings per share jumped 34 percent. Hershey also raised its target for long-term earnings per share growth by 1 percentage point, to a range of 9 percent to 11 percent annually.
The candy company isn’t feeling the effects of a weak economic recovery like many others, says Thilo Wrede, an analyst at Jefferies. Even so, he rates Hershey a “Hold,” with a target price of $95. That implies a 5 percent drop from Wednesday’s close of $99.94.
Hershey trades at 25 times its expected earnings per share over the next 12 months, higher than other food companies. General Mills, which makes Nature Valley granola bars and other products, trades at 17 times. Mondelez International, which makes Oreo cookies, trades at 20 times. Several analysts expect Hershey’s momentum to continue, but caution investors that it is not an attractive entry point because of the stock’s valuation.
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