3 Reasons HSY is Risky and 1 Stock to Buy Instead

Although Hershey (currently trading at $179.43 per share) has gained 9.9% over the last six months, it has trailed the S&P 500’s 16.4% return during that period. This might have investors contemplating their next move.

Is now the time to buy Hershey, or should you be careful about including it in your portfolio? See what our analysts have to say in our full research report, it’s free for active Edge members.

Why Is Hershey Not Exciting?

We don't have much confidence in Hershey. Here are three reasons there are better opportunities than HSY and a stock we'd rather own.

1. Demand Slipping as Sales Volumes Decline

Revenue growth can be broken down into changes in price and volume (the number of units sold). While both are important, volume is the lifeblood of a successful staples business as there’s a ceiling to what consumers will pay for everyday goods; they can always trade down to non-branded products if the branded versions are too expensive.

Hershey’s average quarterly sales volumes have shrunk by 1.7% over the last two years. This decrease isn’t ideal because the quantity demanded for consumer staples products is typically stable.

2. Shrinking Operating Margin

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

Looking at the trend in its profitability, Hershey’s operating margin decreased by 5.2 percentage points over the last year. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. Its operating margin for the trailing 12 months was 16.8%.

3. EPS Trending Down

Analyzing the change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.

Sadly for Hershey, its EPS declined by 3.8% annually over the last three years while its revenue grew by 4.4%. This tells us the company became less profitable on a per-share basis as it expanded.

Final Judgment

Hershey isn’t a terrible business, but it isn’t one of our picks. With its shares lagging the market recently, the stock trades at 27.8× forward P/E (or $179.43 per share). At this valuation, there’s a lot of good news priced in - you can find more timely opportunities elsewhere. We’d recommend looking at a dominant Aerospace business that has perfected its M&A strategy.

Stocks We Would Buy Instead of Hershey

Your portfolio can’t afford to be based on yesterday’s story. The risk in a handful of heavily crowded stocks is rising daily.

The names generating the next wave of massive growth are right here in our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.

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