On a day marked by a significant drop in its stock price, Prestige Consumer Healthcare Inc (PBH, Financial) saw a decline of 7.01%, continuing a three-month downward trend of -3.37%. With an Earnings Per Share (EPS) of 4.17, investors might wonder if the stock is fairly valued. This analysis delves into the intrinsic value of Prestige Consumer Healthcare, aiming to determine whether the current market price reflects its true worth.
Company Overview
Prestige Consumer Healthcare, a leading player in the over-the-counter healthcare market, boasts a diverse portfolio of top brands such as Clear Eyes, Dramamine, Monistat, and Summer's Eve. Predominantly operating in North America, which accounts for about 85% of its revenue, the company also has a presence in Australia, New Zealand, and parts of Asia. Currently, with a market cap of $3.30 billion and a stock price of $66.46, understanding its valuation relative to the GF Value of $61.88 is crucial for potential investors.
Understanding the GF Value
The GF Value is a proprietary measure designed to predict a stock's intrinsic value, factoring in historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. For Prestige Consumer Healthcare, the GF Value suggests a fair value at which the stock should ideally trade. This valuation indicates that the stock, currently priced at $66.46, aligns closely with our calculated GF Value, suggesting that it is fairly priced.
Given this valuation, the long-term return of Prestige Consumer Healthcare's stock is likely to mirror the rate of its business growth, assuming market conditions remain stable.
Financial Strength and Risks
Investing in companies with robust financial strength reduces the risk of permanent capital loss. Prestige Consumer Healthcare, with a cash-to-debt ratio of 0.05, ranks lower than most of its peers in the Drug Manufacturers industry. This positioning suggests a higher financial risk compared to its competitors. The overall financial strength of the company is rated 5 out of 10 by GuruFocus, reflecting a fair but not robust financial position.
Profitability and Growth Prospects
Prestige Consumer Healthcare has maintained profitability over the past decade, with an impressive operating margin of 30.81%, ranking it higher than 95.38% of its industry peers. However, its 3-year average revenue and EBITDA growth rates are below industry medians, which could be a concern for growth-focused investors.
The comparison between the company's Return on Invested Capital (ROIC) and Weighted Average Cost of Capital (WACC) reveals that Prestige Consumer Healthcare is generating sufficient returns on its investments, outpacing its cost of capital, which is a positive indicator of financial health.
Conclusion
In summary, Prestige Consumer Healthcare (PBH, Financial) appears fairly valued based on its current GF Value, with a stable financial condition and satisfactory profitability. However, potential investors should be cautious about its below-average growth rates. For a deeper understanding of Prestige Consumer Healthcare's financial health and stock performance, consider exploring its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
