Let’s talk about growth
Let’s talk about value
Let’s talk about Helen of Troy (HELE)
This thriving consumer products company needs to be on your radar now. That’s because so many of HELE’sheir diversified business lines are flourishing at this time including well-known brands like Revlon, OXO, Hydro Flask, Vicks, Braun, and Honeywell.
I expect HELE to outperform in the coming months as it’s the rare stock that is attractive to nearly every investor regardless of their style and school of thought. This is indeed a rare trait.
For example, while a growth investor salivates at a stock like Tesla (TSLA), it makes a value investor nauseous due to its inflated sales and earnings multiple.
However, HELE appeals to both groups, since the stock has a forward price-to-earnings (P/E) ratio of 18.4 with 34% revenue growth and 37% earnings growth. In contrast, the S&P 500 has a forward P/E of 25.1 with flat revenue growth and an earnings decline of 14% in 2020.
This means that HELE is a better value proposition than the S&P 500 while also having better growth prospects.
Thriving During the Pandemic
The coronavirus negatively impacted many companies and industries. However, HELE was an exception. People working from home, taking online classes, and not going out did result in lower sales for its beauty segment. However, this was offset by increased sales in its Health & Home and Housewares divisions as people increased spending on these items.
Overall, HELE posted an impressive revenue growth rate of 34% on a trailing twelve-month basis, while the S&P 500 experienced a decline in revenue growth.
Now, certain parts of the economy experienced an acceleration in growth due to the conditions created by the coronavirus. And, for many of these companies, there will be some “reversion to the mean” as the economy normalizes and people return to pre-pandemic behaviors.
Strong Post-Pandemic Prospects
HELE is likely to maintain its growth trajectory since its Beauty division will be a beneficiary of the economy reopening. There’s likely to be massive pent-up demand for eating out at restaurants, going to bars or nightclubs, attending concerts, etc.
Additionally, the economy returning to normal means that in-person classes will resume, employment will rebound, and offices will reopen. All of these developments are supportive of a spike in sales for makeup and beauty products and eventually a return to pre-pandemic growth rates.
HELE’s Housewares unit was a beneficiary of increased spending on home goods during the coronavirus. However, the strong housing market means that spending on these items will remain resilient, unlike other categories.
Ultimately, HELE is a consumer products business so its fortunes are tied to the health of the consumer. Despite the challenges of the coronavirus, the consumer is in good shape, on an aggregate level.
Measures like incomes and consumer spending have rebounded to new highs. Household balance sheets are in good shape as many used the stimulus, from last year, to pay off debt. Record-high stock prices and housing prices are also supportive of growth. Further, it seems that Congress is intent on a bigger round of stimulus payments.
Putting It Altogether
HELE was attractive before the coronavirus...during the coronavirus...and should be again as the virus starts to fade away in the years ahead. That combination of consistent growth coupled with ample value is why it's a great choice for my Stock of the Week.
Speaking of value, the average Wall Street target is $255 which shares closing today just a notch above $210. That level of value is rare in a market pushing all time highs and gives us plenty of reasons to scoop up shares of HELE today.
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HELE shares were trading at $211.05 per share on Monday afternoon, down $3.05 (-1.42%). Year-to-date, HELE has declined -5.01%, versus a 1.29% rise in the benchmark S&P 500 index during the same period.
About the Author: Steve Reitmeister
Steve is better known to the StockNews audience as “Reity”. Not only is he the CEO of the firm, but he also shares his 40 years of investment experience in the Reitmeister Total Return portfolio. Learn more about Reity’s background, along with links to his most recent articles and stock picks.The Stock of the Week is ??? appeared first on StockNews.com