Hershey Co (HSY)

Conclusion

Hershey Co makes chocolate and non-chocolate confectionery, gum and mints, pantry items and salty snacks, and exports to about 65 countries. On 9 November 2026 the shares were priced at 173.48 USD, giving a market capitalisation of 25.4 billion USD and an enterprise value of 29.8 billion USD.

The verdict is undervalued. The price-to-earnings ratio of 14.2x compares with a ten-year median of 27.6x, and enterprise value to EBITDA of 9.9x compares with a median of 17.8x. The discounted cash flow gives 331.24 USD per share at a discount rate of 8.9%, and the fair value from historical multiples is 338.77 USD. The fair value band runs from 268.01 to 402.01 USD with a midpoint of 335.01 USD, a margin of safety of 93.1%. The reverse DCF implies growth of -2.4% a year, against revenue growth of 7.5% a year over five years.

The strongest numbers are free cash flow conversion of 131.2% over the last twelve months, ROIC of 19.4% against a WACC of 8.0%, and an Altman Z-score of 3.84. The weakest are EPS growth of -6.6% a year over five years, estimates for next year cut by 4.0% over 90 days with 15 downward revisions in the last 30 days, and a gross margin of 41.9% against a ten-year median of 45.2%.

Financial health

Financial strength is green, held up by four signals assessed as good: the Altman Z-score, net debt to EBITDA, interest coverage and the current ratio. The current ratio is 1.24 and the quick ratio is 0.57. Net debt to EBITDA is 1.5x, debt to equity is 1.05x, and interest coverage is 11.5x. The Altman Z-score is 3.84, in the safe zone. The Altman model was designed for manufacturers, and Hershey is one, so it applies directly. Insolvency risk is low, about 1.2% by the estimate of the Ohlson model over one to two years. The balance sheet is not a constraint on the investment case, although the quick ratio shows that the company relies on inventory and receivables to cover short-term obligations.

Earnings quality

Earnings quality is green, with three signals good and one neutral. Free cash flow conversion is 131.2% on a trailing basis and 106.6% over five years, and the accrual ratio is -10.5%, which means cash generation exceeds reported earnings. Stock-based compensation is 0.6% of revenue, and free cash flow after it is 2.28 billion USD. The share count fell at a compound rate of 0.6% a year over five years, which indicates buybacks. The Piotroski score is 5 of 9, and the Beneish M-score of -2.78 points to an unlikely risk of earnings manipulation. The company beat estimates in all eight of the last quarters, by an average of 19.7%. Estimates for the current year rose 1.9% over 90 days, but estimates for next year fell 4.0% over 90 days, with 15 downward revisions in the last 30 days.

Profitability

Profitability is green, with four signals assessed as good. The operating margin is 20.8% against a ten-year median of 21.3%, and the net margin is 14.6% against a median of 15.4%. The gross margin, at 41.9%, is below its median of 45.2%, so cost pressure is visible at the gross line. ROIC is 19.4% against a WACC of 8.0%, and the given spread is 11.4%. The five-year median ROIC is 18.8%, which suggests the return is stable. Return on equity is 36.8%, but leverage inflates it. On the 2025 year-end split, the net margin of 7.6%, asset turnover of 0.85x and equity multiplier of 2.96x show that most of the return comes from financial leverage.

Growth

Growth is yellow, with two signals good, one neutral and one bad. Revenue grew at a compound rate of 3.9% over three years, 7.5% over five years and 4.7% over ten years. Revenue rose in all ten of the last ten years. Earnings per share are the weak point: they fell at a compound rate of 18.3% over three years and 6.6% over five years, and grew 6.5% a year over ten years. Free cash flow per share grew 7.5% a year over five years, although it fell 0.6% a year over three years. Analysts expect next-year earnings growth of 9.5%, but the downward revisions to those estimates weigh against that figure.

Valuation

Valuation is green, based on one signal assessed as good, the verdict itself. The price-to-earnings ratio of 14.2x is 48.8% below its ten-year median of 27.6x. Enterprise value to EBITDA of 9.9x is 44.6% below its median of 17.8x, price to free cash flow of 10.8x is 57.4% below a median of 25.3x, and price to book of 5.2x is 65.7% below a median of 15.2x. The DCF gives 331.24 USD per share at a discount rate of 8.9%, and its terminal value makes up 57.5% of the total. The fair value from historical multiples is 338.77 USD. The fair value band runs from 268.01 to 402.01 USD, with a midpoint of 335.01 USD, a margin of safety of 93.1% at the price of 173.48 USD. These figures rest on fixed assumptions, including a 5% equity risk premium and capped growth, so they indicate an order of magnitude and are not a price target. The dividend yield is 4.5%, and dividends take 48.0% of free cash flow.

Risks

The main risk is that the market is right to price in a slow decline in earnings. Earnings per share have fallen at 6.6% a year over five years, and falling estimates for next year could make the apparent cheapness reflect a weaker profit base rather than a mispricing. A further fall in the gross margin below its median of 45.2% would reduce cash generation and make the 131.2% free cash flow conversion harder to sustain. The 57.5% share of the DCF that comes from the terminal value means the valuation is sensitive to long-term assumptions. Analyst coverage and the Piotroski score of 5 of 9 offer limited comfort on the trend. This analysis does not include a debt maturity schedule or revenue by segment, so refinancing risk and the contribution of each product line cannot be assessed.