HERSHEY CO (HSY): what the price requires
At today's price, HERSHEY CO (HSY) is priced for +7.3% growth. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.
Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/HSY
Headline
| Field | Value |
|---|---|
| Ticker | HSY |
| Company | HERSHEY CO |
| Current price | $175.03/sh |
| Composition | North America Confectionery 81% / North America Salty Snacks 11% / International 8% |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin needed | 8.6% |
| Operating margin today | 14.0% |
| Margin compression implied | -5.4pp |
| Implied growth | 7.3% |
| Multiple paid | 25x operating income |
The operating-margin requirement is derived from the framework's value band at year 12, a separately labeled basis from the headline growth/duration solve.
Solve inputs: computed at a 7.2% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~8.6pp.
Reconcile: at the x-ray's 9.3% required return this reads ~23.6%/yr; the models below use their own rates.
How unusual the bet is: within-range
| Reference | Value |
|---|---|
| vs own history | +0.31σ |
| cohort percentile (of 69 peers) | 71 |
| implied end-window share | 0% |
Valuation X-Ray
Asset, earnings-power and peer-multiple models all land far below the price; ONLY the growth-DCF reaches it. The bet is durable compounding the static frames structurally cannot price (a moat/durability premium).
How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 2.77x | 4 | expensive |
| Earnings | 2.62x | 3 | expensive |
| Relative | 1.62x | 3 | expensive |
| Growth | 0.91x | 4 | justifies |
Families that justify the price: Growth Families that call it expensive: Asset, Earnings, Relative
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.1%); the inversion above states its own rate.
Per-Model Detail (n=14)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $268.55 | 0.65x | yes | FCF base $2.1B, growth 13% (input: historical growth), terminal g 4.0%, WACC 8.1%, 6yr projection |
| DCF Exit Multiple | Growth | $230.90 | 0.76x | yes | Exit EV/EBITDA: 18.1x / 20.1x / 22.1x (bear / base = today's held flat / bull), 6yr |
| Relative Valuation | Relative | $108.25 | 1.62x | yes | P/S fallback (negative EPS): Sector P/S 2.0x × TTM revenue — excluded from consensus |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | $99.87 | 1.75x | yes | Stage 1: 5% for 5yr, Stage 2: 3.5% perpetual |
| Simple Excess Return | Asset | $53.39 | 3.28x | yes | BV/sh $21.37, ROE (TTM) 23.1%, ke 9.3% |
| Two-Stage Excess Return | Asset | $84.23 | 2.08x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $163.64 | 1.07x | yes | Rev $12.0B, growth 13% (input: historical growth; tapered), Terminal P/S: 2.7x / 3.2x / 3.8x (bear / base = today's held flat / bull, cap 12x) |
| Peter Lynch Fair Value | Relative | $0.00 | — | no | Negative/zero EPS — earnings-based value floored at $0 |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $66.93 | 2.62x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $2.30B × (1−27%) / WACC 8.1% → EPV (no growth) |
| Residual Income | Asset | $77.69 | 2.25x | yes | BV $21.37 + 5yr PV of (ROE (TTM) 23.1% − Kₑ 9.3%) × BV; BV grows 8.8%/yr |
| Graham Number | Asset | — | — | no | — |
| EV/EBITDA Relative | Relative | $113.77 | 1.54x | yes | EBITDA $2.23B × sector EV/EBITDA 14.0x |
| FCF Yield | Earnings | $66.82 | 2.62x | yes | FCF $1925.8M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | $63.45 | 2.76x | yes | SBC-adj FCF $1.86B (FCF $1.93B − SBC $0.07B) capitalized at Kₑ |
| Ben Graham Formula | Earnings | — | — | no | — |
| ROIC-Justified P/B | Asset | $11.54 | 15.17x | yes | BV $21.37 × (ROIC 4.4% / WACC 8.1%) |
| P/Sales Sector | Relative | $108.25 | 1.62x | yes | Revenue $11.99B × sector P/S 2.0x |
| PEG Fair Value | Relative | — | — | no | — |
| Earnings Yield | Earnings | — | — | no | — |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net debt | $5.4b |
| Net debt / NOPAT (after-tax) | 4.52x |
| Net debt / operating income (pre-tax) | 3.32x |
| Interest coverage | 7.4x |
| Burning cash | no |
Bullet Takeaways
- Hershey owns the leading position in U.S. confectionery (Reese's, Hershey's, Kit Kat) plus a growing salty-snacks business (SkinnyPop, Dot's), and the company tracks its share across channels covering roughly 90% of its U.S. confectionery and salty-snack retail sales.
- The biggest risk is cocoa: unprecedented cocoa inflation compressed the operating margin to about 14% from its usual low-twenties, and the price already credits a recovery that depends on cocoa moderating, which the company itself says will stay elevated for some time.
- Watch the adjusted-earnings recovery management has guided to in 2026 and whether pricing actions hold without eroding volume, after a new CEO took the helm in August 2025.
Bull Case
The counterintuitive fact about Hershey right now is that the methods calling it expensive are reading a margin that the business does not normally earn. Operating margin sits near 14%, well below where this company has historically run, because an unprecedented spike in cocoa costs flowed straight through the cost of chocolate. Capitalize that depressed margin and the stock looks richly valued on every static lens. But the depression is the input, not the conclusion: management has framed 2026 as a year of recovery, guiding to roughly 4% to 5% net sales growth and a 30% to 35% adjusted earnings recovery. The bull case is that the price is not paying for heroic growth; it is paying for a margin that snaps back toward normal once the cocoa shock passes.
Underneath the commodity noise, the franchise is as durable as branded food gets. Hershey leads the U.S. chocolate and non-chocolate confectionery category, and it measures that leadership rigorously, tracking consumer takeaway across channels representing about 90% of its U.S. confectionery and salty-snack retail business. Brands like Reese's and Hershey's are impulse purchases with pricing power that a private label cannot easily replicate, which is why the company has been able to raise prices through the cocoa cycle rather than absorb the whole hit. The North America Confectionery segment is roughly four-fifths of revenue and the engine of that pricing power.
The portfolio is also broadening in ways that reduce reliance on chocolate alone. Salty snacks add a category with its own growth, and management has pointed to an unexpected tailwind, noting that GLP-1 weight-loss drugs are boosting demand for mints and gum like Ice Breakers. The company manages cocoa exposure through derivatives, recording the gains and losses in cost of sales as "the changes in fair value of these derivatives are recorded as incurred", a hedging program that smooths but does not eliminate the cost. The bull case is a dominant brand portfolio working through a temporary input shock with a 30%-plus earnings recovery already in management's sights.
Bear Case
The structural truth a Hershey holder has to face is that the multiple is pricing a margin recovery that has not happened yet, while the thing that broke the margin is still elevated. The company's own CEO has said cocoa prices will remain high for some time even if they eventually moderate. At roughly 25 times operating income, the price embeds operating-profit growth of about 7.4% a year for five years, and the bulk of that is not unit growth in a mature confectionery market; it is the assumption that the operating margin climbs back from today's depressed 14% toward its historical level. If cocoa stays high longer than expected, that recovery slips, and the price is left supporting a far smaller earnings base than it currently assumes.
Pricing, the lever that protected Hershey through the shock, has a limit the bear case turns on. Confectionery demand is not perfectly inelastic, and management has flagged concern about competitive activity and volume elasticity as prices have risen. There is a level at which higher chocolate prices push shoppers toward smaller pack sizes, private label, or simply less indulgence, and a company that has leaned on price to offset cocoa would then face both a cost problem and a volume problem at once. The hedging program records commodity gains and losses through cost of sales, so the margin remains exposed to where cocoa actually settles, not where the company wishes it would.
The valuation leaves little margin for any of this going wrong, and a new CEO is steering through it. Only the growth-DCF lens reaches today's price; the asset-value, earnings-power, and peer-multiple lenses all read it as richly valued, the price standing well above book-value-plus-profitability and above what current cash earnings capitalize to. That is the signature of a durability premium, a bet that this franchise compounds in a way the static frames cannot capture. Net debt of about $5.4 billion sits at a bit over three times pre-tax operating income with interest coverage near seven times, manageable but not a fortress, and a leadership transition completed in August 2025 adds execution risk to a year that has to deliver a sharp earnings rebound for the price to make sense.
Valuation
Today's price works out to roughly 25 times company-wide operating income, which inverts to operating growth of about 7.4% a year over a five-year stage. Read as a direction rather than a measured figure, that number is the key to the whole picture, because in a mature confectionery market most of that implied growth is not new volume. It is the recovery of an operating margin that cocoa inflation pushed down to about 14% from its historical low-twenties. The price is, in effect, underwriting management's guided 30% to 35% adjusted earnings recovery. The bet is margin normalization, dressed up as growth.
The disagreement among the methods makes the durability premium explicit. The asset-value lens, the earnings-power lens, and the peer-multiple lens all read the price as richly valued on what the company earns today; only the growth-DCF reaches it. When a single forward-growth method is the only one that touches the price, the market is paying for durable compounding that the static frames structurally cannot price, the moat premium a dominant branded-food franchise earns. The risk in that pattern is specific: the premium is justified only if the margin recovery the growth lens assumes actually arrives, and that arrival is gated by a cocoa price the company does not control.
Solvency frames the downside without resolving the bet. Net debt of about $5.4 billion runs at just over three times pre-tax operating income, with interest coverage around seven times and a share count slowly declining, the balance sheet of a steady cash generator returning capital rather than one under pressure. The valuation does not hinge on the balance sheet; it hinges on cocoa and the margin recovery it gates. If the recovery lands, the static methods reprice toward the price; if cocoa stays high and elasticity bites, the price is supporting a thinner earnings stream than it assumes. That single dependency, more than any leverage figure, is what the buyer is weighing.
Catalysts
The dominant catalyst is the 2026 earnings recovery clearing or missing management's bar. The company has guided to roughly 4% to 5% net sales growth and a 30% to 35% adjusted earnings recovery for the year, a steep rebound that depends on pricing holding and cocoa costs beginning to moderate. Each quarterly print is a check on whether the margin is climbing back as guided, with the cocoa-cost line and the volume response to higher prices the two numbers that matter most. A new CEO since August 2025 makes execution against that recovery the central story.
The commodity and category threads run alongside it. Cocoa prices are the external variable the entire margin recovery turns on, so any sustained move in the cocoa market is a direct read on the thesis. On the demand side, management has pointed to GLP-1 drugs lifting mints and gum, an emerging tailwind for part of the portfolio, while the salty-snacks business offers a second growth lane beyond chocolate. The next earnings call's commentary on pricing elasticity and competitive activity will signal whether the price increases that protected the margin are starting to cost the company volume.
Peer Cohorts (Per Segment, With Filing Citations)
North America Confectionery (reported)
- MDLZ (Mondelez International, Inc.)
- (no filing in the citation store)
- TR (TOOTSIE ROLL INDUSTRIES INC)
- (no filing in the citation store)
- KHC (Kraft Heinz Co)
- (no filing in the citation store)
- GIS (GENERAL MILLS INC)
- (no filing in the citation store)
North America Salty Snacks (reported)
- CAG (CONAGRA BRANDS, INC.)
- (no filing in the citation store)
- GIS (GENERAL MILLS INC)
- (no filing in the citation store)
- MDLZ (Mondelez International, Inc.)
- (no filing in the citation store)
- KHC (Kraft Heinz Co)
- (no filing in the citation store)
- JJSF (J&J SNACK FOODS CORP.)
- (no filing in the citation store)
Core business (reported)
- MDLZ (Mondelez International, Inc.)
- (no filing in the citation store)
- TR (TOOTSIE ROLL INDUSTRIES INC)
- (no filing in the citation store)
- CPB (THE CAMPBELL'S COMPANY)
- (no filing in the citation store)
- SJM (THE J. M. SMUCKER COMPANY)
- (no filing in the citation store)
- CAG (CONAGRA BRANDS, INC.)
- (no filing in the citation store)
- MKC (McCORMICK & COMPANY, INCORPORATED)
- (no filing in the citation store)
- MZTI (The Marzetti Company)
- (no filing in the citation store)
- LW (Lamb Weston Holdings, Inc.)
- (no filing in the citation store)
Methodology Note
- Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
- Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
- Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
- Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.
Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.
Sources
company FY2025 10-K · company guidance and leadership announcements, 2025-2026 · company FY2026 guidance, 2026 · company commentary, 2026 · company leadership announcement, 2025