Jefferies has upgraded shares of The Simply Good Foods Company (NASDAQ:SMPL), arguing that the company’s valuation does not fully reflect the strength of its Quest brand and broader exposure to growing demand for protein-focused products.

The analysts see the company as well-positioned within the “protein megatrend,” with more than 85% of its sales tied to “Easy Protein” categories such as bars, shakes and snacks.

Although overall growth has been modest, analysts said the headline figure of roughly 3% over the past 52 weeks understates stronger gains in the Performance and Salty Snacks segment, which grew about 12%, while declines of around 15% in Weight Management continued to weigh on results.

Jefferies upgraded the stock to ‘Buy’ with a $22 price target. “We upgraded shares yesterday, as valuation has overlooked the fact that Quest is a category leader growing mid-single digit percentage and the portfolio has solid exposure to the protein megatrend,’ they wrote.

The firm highlighted Quest as a key driver, describing it as “consistent” and maintaining leadership in the fragmented nutrition bar market, with successful expansion into salty snacks such as chips.

Jefferies believes that both areas are contributing to a healthier growth mix and projected a 7% compound annual growth rate for Quest from fiscal 2026 through 2028.

However, the outlook for other brands remains more mixed. Jefferies flagged challenges at OWYN and Atkins, citing distribution headwinds, product quality issues and reduced shelf space.

“Soft spots make it difficult to deliver consistent growth,” the analysts wrote, adding that while some of these issues could be addressed over time, they have taken a more cautious stance in their forecasts. The firm models modest growth for OWYN and a decline for Atkins over the same period.

Near-term pressures are also expected to weigh on results. Jefferies pointed to increased promotional activity and rising input costs, including whey and cocoa, which have pressured margins.

“These pressures will be absorbed before a rebound can occur. They are not structural,” the analysts wrote, adding they expect margins to recover to fiscal 2025 levels within two years.

Despite these headwinds, Jefferies believes the current valuation underestimates the company’s underlying assets. “On our below-Street numbers, we see an asset with strategic value at a healthy discount to fair value,” the analysts wrote.

The firm’s sum-of-the-parts analysis assigns value primarily to Quest and OWYN while excluding Atkins due to uncertainty around its turnaround. Based on this approach, Jefferies estimates an implied business value of roughly $2 billion, suggesting what it views as a margin of safety in the current share price.

Jefferies forecasts a slight decline in fiscal 2026 sales and adjusted EBITDA, reflecting higher marketing spending and limited near-term margin recovery, followed by a rebound in 2027 as input costs ease.

The firm’s $22 price target is based on eight times its fiscal 2028 adjusted EBITDA estimate of $290 million.

Shares of Simply Good Foods traded hands at $15 on Tuesday afternoon.