We firmly believe that Hershey’s (HSY) is priced at a premium valuation for the slow growth that it offers. It currently trades at 32 times trailing earnings; very expensive relative to historical growth. Hershey’s price to earnings growth ratio is well over 2.0, suggesting the stock is overvalued, while the price to book is over 26.

These simple metrics are just one way to look at the name and see that this is pricey for a stock that only pays a 2.6% dividend yield. The risk is not worth the reward, and earnings in the most recent quarter were subpar.

When we factor in the numerous issues this quarter surrounding sales declines and expenses, we see that earnings came in below our expectations as well. The Q4 net income figure on an adjusted basis was $218 million or $1.03 per share, which is the lowest it has been in four years.

It is a hard sell to consider assigning a premium valuation to a name with this type of performance. For the entire year 2017, there was growth year-over-year. Earnings per share for the year 2017 was $4.76, a modest improvement from the $4.41 last year.

Still, while this is growth, it was only a growth of 8%. Even on an unadjusted basis or a GAAP basis, growth was under 10% per share. We do not see things getting better in 2018.

When we factor in the trajectory of earnings, we have concerns. Looking ahead, the company is going to get a bit of help from tax reform, at least on the bottom line. That said, the company does have several new products coming to market in 2018, including the Hershey’s Gold Bar and the Reese’s Outrageous Bar.

We know that history has shown that new product launches tend to perform well for the company and give sales a short-term boost.

This was one reason we saw a Q4 year-over-year decline. We saw the presence of new products last year boosted Q4 2016.

With the recent acquisition of Amplify, we expect sales to rise. However, we think organic sales will be flat to up 1%.