Edgewell Personal Care currently trades at $17.82 per share and has shown little upside over the past six months, posting a middling return of 4.8%. The stock also fell short of the S&P 500’s 11% gain during that period.
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Why Do We Think Edgewell Personal Care Will Underperform?
We’re cautious about Edgewell Personal Care. Here are three reasons we avoid EPC, plus one stock we’d rather own.
1. Core Business Falling Behind as Organic Sales Decline
When analyzing revenue growth, we care most about organic revenue growth. This metric captures a business’s performance excluding one-time events such as mergers, acquisitions, and divestitures as well as foreign currency fluctuations.
Edgewell Personal Care’s demand has been falling over the last eight quarters, and on average, its organic sales have declined by 1.2% year on year. 
2. Shrinking Operating Margin
Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses — everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.
Analyzing the trend in its profitability, Edgewell Personal Care’s operating margin decreased by 7.3 percentage points over the last year. Edgewell Personal Care’s performance was poor no matter how you look at it - it shows that costs were rising and it couldn’t pass them onto its customers. Its operating margin for the trailing 12 months was breakeven.
3. EPS Trending Down
Analyzing the long-term change in earnings per share (EPS) shows whether a company’s incremental sales were profitable — for example, revenue could be inflated through excessive spending on advertising and promotions.
Sadly for Edgewell Personal Care, its EPS declined by 6.8% annually over the last three years, more than its revenue. This tells us the company struggled because its fixed cost base made it difficult to adjust to shrinking demand.
Final Judgment
Edgewell Personal Care doesn’t pass our quality test. With its shares lagging the market recently, the stock trades at 8.7× forward P/E (or $17.82 per share). While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are superior stocks to buy right now. Let us point you toward the most entrenched endpoint security platform on the market.
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