Simply Good Foods: What explains the 35% upside in the health food stock?

Protein is the current crazy among consumers. Yet Simply Good Foods, one of the pioneers in producing high-protein bars, shakes, and other products, is struggling. 

Oninvest explains in this deep dive how the company is trying to revive its Atkins and Quest brands, and why Wall Street believes it will succeed.

Simply Good Foods itself was established in 2017, but the history of its key Atkins brand began much earlier. Atkins Nutritionals was founded in 1989 by cardiologist Robert Atkins, the creator of the low-carb diet and author of more than a dozen books describing its benefits.

The Atkins principles were jokingly described as the “cheeseburger-hold-the-bun” diet because they allowed fatty foods, including bacon, meat, cheese, eggs, and mayonnaise, while limiting carbohydrates. Atkins launched his own brand to make it easier for people trying to lose weight to follow his dietary recommendations and choose appropriate snacks. The diet peaked in popularity in the early 2000s, when around 30 million Americans tried it, the Guardian reported. The medical community, however, remained skeptical.

Atkins died in an accident in 2003. Later that year, Parthenon Capital and Goldman Sachs Capital Partners completed the acquisition of the eponymous company. The terms were not disclosed. The management decided to turn Atkins into a mass-market brand and launch more than 1,000 new products, including macaroni and cheese, ice cream, barbecue sauce, and vitamins. In 2005, however, the company filed for bankruptcy with around $300 million in debt.

After Atkins emerged from bankruptcy, investment firm North Castle Partners acquired it in 2007. Roark Capital took control in 2010. The new owners focused on developing the healthy-snacking category, positioning the products as part of a healthy lifestyle rather than a temporary diet.

The brand continued expanding its snack range and investing more heavily in marketing. The company also began collaborating with celebrities. Sharon Osbourne, cohost of the CBS talk show The Talk, became a brand ambassador and embarked on a weight-loss journey with Atkins. The company went on to report eight consecutive years of U.S. retail sales growth.

In 2017, Atkins went public through a merger with SPAC Conyers Park Acquisition Corp. The Simply Good Foods Company was established upon the deal's closure.

Simply Good Foods planned to grow not only organically but also by acquiring complementary brands. The first was Quest Nutrition, which it bought for $1 billion in 2019.

Over the preceding several years, Quest had grown from a startup making protein bars in a kitchen into a billion-dollar business by engaging a growing community of fitness bloggers and influencers. Quest founder Tom Bilyeu told Forbes that he had overcome obesity himself and decided to help others do the same with food that would be “metabolically advantageous” without resembling everything else on the market. Quest became known for dessert-inspired protein-bar flavors such as Chocolate Chip Cookie Dough, White Chocolate Raspberry, and Blueberry Muffin, as well as its protein chips, one of the brand’s most popular products.

In 2024, the company began talking about the need to revitalize the brand. It started cutting underperforming products and distribution to preserve profitability in 2025. Atkins, the company’s oldest brand, had also begun struggling, Simply Good Foods stated in its fiscal 2024 results.

Simply Good Foods continues to face difficult times despite steadily expanding its business and the surging popularity of protein products, the Wall Street Journal reported in April.

Joe Scalzo returned as president and CEO in January to lead the company’s turnaround. He was dissatisfied with its results at the start of the year. “We’ve experienced execution challenges against the dynamic and highly competitive marketplace,” Scalzo said, as quoted by the Journal. Simply Good Foods believes Atkins could benefit from the growing use of GLP-1 weight-loss drugs because people losing weight need to preserve muscle mass while consuming fewer calories.

Simply Good Foods’ net sales fell 6.3% year over year to $357 million in the third quarter of its fiscal 2026. The main factor was a 24.6% decline in Atkins sales, only partially offset by growth of 1.1% at Quest and 3.6% at protein-shake maker OWYN, which Simply Good Foods acquired in 2024. The company attributed the results to previously anticipated distribution losses for Atkins and softer retail takeaway. The net loss totaled $52 million, versus net income of $41.1 million in the year-earlier period.

Quest already generates around 65% of Simply Good Foods’ total revenue. Its sales grew at high, and at times double-digit, rates for several years, but growth has now slowed amid market saturation and competition. Rival brands regularly introduce new flavors and limited-time offerings to keep consumers interested, Consumer Edge Senior Vice President of Research and Market Intelligence Michael Gunther told the Journal. “They’re coming up with new flavors, limited-time offers, so it keeps people interested,” Gunther said. Barebells, for example, offers Key Lime Pie and Orange Creamsicle flavors, while Built Brands sells marshmallow-like bars.

DA Davidson analysts Matt Curtis and Andrew Tompkins highlighted in a June report seen by Oninvest that Simply Good Foods’ third-quarter revenue and earnings both beat expectations.

Curtis and Tompkins identified stronger sales at Quest and OWYN as the main positive surprise, although Quest bar sales are suffering from a lack of innovation versus competitors. Simply Good Foods is only in the early stages of its turnaround program, however, and DA Davidson does not yet have sufficient confidence that the improvement in sales will prove sustainable. The analysts maintained their “neutral” rating at a target price of $14 per share, implying 26.8% upside to the Tuesday closing price.

Inflation is weighing on Simply Good Foods’ performance, according to Deutsche Bank. The company faces high costs for whey protein, packaging, and logistics, the analysts wrote in a July 10 report seen by Oninvest. They expect the gross margin to recover in fiscal 2027 as September price increases across all three brands and productivity gains offset higher costs. Deutsche Bank has raised its target price to $14 per share from $13 per share but maintained its “hold” rating.

Simply Good Foods shares have fallen 45% year to date. The stock has six “hold” ratings from the 11 Wall Street analysts covering the company, versus four “buy” ratings. The average target price of $14.88 per share implies around 35% upside to the Tuesday closing price.