Company Overview: TreeHouse Foods, Inc. (NYSE: THS) is engaged in the manufacturing and distribution of private label packaged foods and beverages in North America.  It operates in two segments, Meal Preparation, and Snacking & Beverages. THS sells its products through retail grocery, warehouse & club stores and e-commerce channels, apart from restaurants and institutions through foodservice distributors. The company has over 40 production facilities spread across the United States, Canada and Italy. The company was founded in 1862 and is based in Oak Brook, Illinois.

Recent Updates-

• Sale of Ready to Eat Business- TreeHouse Foods announces the successful competition of the sale of Ready-to-Eat Cereal Business to the Post Holding Inc (NYSE: POST) for $85 million.
• March 2021 quarter results- The company posted positive results were posted with revenues of $1.06 billion along with a gross margin of 17.1% and an adjusted gross profit margin of 18.1%.

Key Risks- The results for June quarter 2021, are expected to take a hit from the period ending of the Federal Aid, which will slow down the spending on consumer staples.

Valuation Methodology: Price/EPS Based Relative Valuation (Illustrative)

Stock Recommendation-

We have valued the stock using a Price/EPS multiple-based illustrative relative valuation and have arrived at a target price that reflects a fall of low double-digit (in % terms). We have assigned a slight discount to Price/EPS Multiple (NTM) (Peer Average), considering the Covid-19 led uncertainties and the associated business risks, rise in competition, and lower consumer retail sales.

Based on technical chart analysis,  the prices are seen forming lower highs and lower lows with a clear indication of the sellers taking charge. The recent support can be witnessed at $38 levels, breaking and sustaining below that can drag the stock into the bear territory. Given the impact from rising fresh COVID 19 surging cases, bearish sentiment on results, we give ‘Sell’ rating on the stock at $42.18, the closing of 4^th August 2021.

Daily Technical Chart – THS

Source: REFINITIV

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined:-

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

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