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Why The Simply Good Foods Company Shot 11% Higher Today

By Eric Volkman – Dec 22, 2020 at 1:42PM

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The niche foods specialist will soon join an exclusive lineup of stocks.

What happened

Shareholders of the happily named The Simply Good Foods Company (SMPL 2.69%) had every reason to be jolly on Tuesday. Their company was tipped to be a component of a well-known stock index, and was rewarded with a nearly 11% pop in share price in the wake of the announcement. 

So what

S&P Dow Jones Indices, the company most famous for being the operator of the S&P 500 index, announced that Simply Good will join its S&P Small Cap 600 index, effective next Tuesday, Dec. 29. The stock replaces financial services company Kinsale Capital Group.

Shopping cart being pushed by gloved hands.

Image source: Getty Images.

Simply Good owns the Atkins line of meals, snacks, and beverages named after the famous low-carb diet popular in the 1990s. Atkins is a durable brand for Simply Good, as its sales have continued to grow.

Augmenting that, in 2019 the company spent $1 billion to buy a peer healthy snack maker, Quest Nutrition, to bolster its product lineup. Although it's still in the somewhat early days, the bulked-up Simply Good is doing well, as it has beat analyst profitability estimates for several quarters running.

Now what

Generally speaking, the stocks that comprise major indexes are generally solid, profitable companies that perform well. Being on the S&P Small Cap 600 will put Simply Good on the radar of the many index funds that trawl indexes for investible stocks. While this alone isn't reason enough to invest in this consumer goods company, it's a positive sign that is worthy of consideration for a buy.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Kinsale Capital Group. The Motley Fool has a disclosure policy.

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