Simple Concepts Research Group

Why Are Hedge Funds Buying Edgewell Personal Care (NYSE: EPC)?

by | Jan 19, 2022 | 52 Week Highs, Stock Picks

Edgewell Personal Care (EPC) Company Overview & Stock Price Forecast

This article provides a brief analysis and stock rating for Edgewell Personal Care (EPC) including an updated stock price target. Additional data on the company’s earnings yield, price/earnings ratio, return on invested capital and YOY performance are discussed as well.

Edgewell Personal Care Fundamentals

EPC Stock Rating

Stock Price Target: $64.79

In the section below, we discuss the earnings yield, P/E, return on invested capital and YTD performance for Edgwell Personal Care in comparison to the Household Products industry and the S&P 500.

Edgewell Personal Care is a Small Cap company with a Market Cap of $2.74B.

How are investors using Edgewell earnings yield to assess the company?

Edgewell (EPC)_ Earnings Yield in Comparison to the Household Products Industry, S&P 500 and 10 Year Treasury Rate

The earnings yield is used to show the percentage of a company’s earnings per share. Investors typically use earnings yield to determine which assets are underpriced or overpriced relative to other variables, like sector, industry or bond yields. Simply put, the earnings yield of a company can be used to assess how expensive a company is in relation to the earnings that are generated. When valuing companies, the SIS Research Group does not utilize the inverse P/E ratio to calculate the earnings yield. Instead, we use an adjusted earning yield calculation to capture variation amongst companies (i.e. debt and tax rates).

The current earnings yield for Edgewell is 13.09%, in comparison to 3.76% for the S&P 500 and 1.78% for the 10-year treasury bond. The median earnings yield for the Household Products industry is 5.30%.

What does Edgewell Price-to-Earnings Ratio (P/E) tell investors about the company?

Edgewell (EPC)_ Price-to-Earnings, Price-to-Sales and Price-to-Book Value in Comparison to the Household Products Industry and the S&P 500

The price-to-earnings ratio (P/E) is a relatively popular metric used by investors and analysts for valuing a company’s stock. The P/E ratio can be used to show how a stock’s valuation compares to other companies and the total market. Investors use the P/E ratio to determine what the market is willing to pay today based on a company’s past or future earnings. A high P/E ratio could mean that a stock’s price is too high relative to earnings, which could be a signal that a stock is currently overvalued. In turn, a low P/E ratio could indicate that a company’s current stock price is low relative to earnings. 

Edgewell is currently trading at a P/E of 24.46. The P/E for the Household Products industry is 34.68 and the P/E for the S&P 500 is 26.59.

What is the current Price-to-Sales Ratio (P/S) for Edgewell?

The Price-to-Sales Ratio (P/S) looks at a company’s market cap and revenue to determine valuation. The P/S ratio is calculated by taking a company’s market cap and dividing by the total sales or revenue. The P/S ratio gives an idea of how much the market values every dollar of a company’s sales and can be effective in valuing unprofitable growth stocks or companies that are currently undergoing special situations or challenges. A lower the P/S ratio can be an indicator of good value.

Edgewell is currently trading at a P/S of 1.37. The P/S for the Household Products industry is 3.99 and the P/S for the S&P 500 is 3.19.

How does Edgewell Price-to-BookRatio (P/B) compare to the Household Products industry?

Price-to-book value (P/B) is the ratio of the market value of a company’s shares divided by its book value of equity (the value of it’s assets on the books). The book value is the difference between the book value of assets and liabilities. Typically, investors use the P/B ratio to assess if a stock is valued properly (a value of one means that the stock price is trading in line with the book value of the company). A company with a high P/B ratio could mean the stock price is overvalued as well as the converse.

Edgewell P/B ratio is 1.77. The P/B for the Household Products industry is 10.39 and the P/B for the S&P 500 is 4.81.

How attractive is Edgewell Return on Invested Capital (ROIC) to investors?

Edgewell (EPC)_ Return on Invested Capital in Comparison to the Household Products Industry and the S&P 500

Investors use the return on invested capital (ROIC) to assess how efficient a company is at turning capital into profits. The ROIC is the amount of money a company makes on it’s investments that is above the average cost of debt and equity.

Investors can use the ROIC to provide context for metrics like the (P/E) ratio. For instance, when used in isolation a low P/E ratio could suggest a company is oversold but the decline could be because a company is no longer generating value for shareholders. Conversely, companies that consistently generate high rates of ROIC can plausibly trade at a premium compared to other stocks, even if their P/E ratios are high.

Edgewell ROIC is currently 4.20% in comparison to 17.71% for the Household Products industry and 9.10% for the S&P 500.

Edgewell (EPC)_ Price Target & 52-Week Price Range

How has EPC stock performed over the past year? What is the current analyst price target?

Over the past 52 weeks, Edgewell has traded between the range of $29.87 and $51.86.

The current Analyst Price Target for Edgewell is $64.79.

What is Edgewell YOY Performance in comparison to its industry and the total market?

The YOY performance for Edgewell is 47.18%. The Household Products industry has a YOY performance of 24.81% in comparison to the YOY S&P 500 performance of 21.47%.

Edgewell (EPC)_ YOY Performance in Comparison to the Household Products Industry and the S&P 500

Recent Financial Results (Q4, 2021)

  • Net Sales increased 11.1%, or 8.4% Organic in Q4 and 7.1%, or 3.7% Organic in FY 2021
  • Operating Income increased 53% for the Q4 and 36% for the FY
  • The Company ended Q4 with $479.2M in cash on hand, access to an undrawn $425.0M credit facility and a net debt leverage ratio of 2.1x
  • Completed Project Fuel with Total Cumulative Gross Savings of ~$280M
  • Announced intent to repurchase approximately $300M in common shares over the next three fiscal years

Stock Price Target: $64.79

Company Overview

EPC Stock Rating

Edgewell Personal Care Company manufactures and markets personal care products worldwide. It operates through three segments: Wet shave, Sun and Skin care, and Feminine care. The Wet Shave segment provides razor systems, such as razor handles and refillable blades, and disposable shave products for men and women under the Schick, Wilkinson Sword, Edge, Skintimate, Shave Guard, and Personna brands.

The Feminine Care segment provides tampons under the Playtex Gentle Glide 360°, Playtex Sport, Playtex and o.b. brands; and markets pads and liners under the Stayfree and Carefree brands. The company was formerly known as Energizer Holdings, Inc. and changed its name to Edgewell Personal Care Company in June 2015.

Edgewell Personal Care Company was founded in 1772 and is headquartered in Shelton, Connecticut. The current CEO is Rod Little.

Be sure to add Edgewell Personal Care (EPC) to your Watch List and if you haven’t done so already, check in on the performance of our Current Portfolio. Keep it simple and always do your due diligence.

This material is provided for informational purposes only and is not financial advice. The information contained herein should not solely be used for the formation of an investment decision, whether you are a long term or short term investor.