Robust ThemeDec 09, 2019 2020-04-08 7:40
Prestige Consumer Healthcare
Prestige Consumer Healthcare (PBH)
Courtesy of Tijuana Jackson Academy
FINANCIAL REPORT: CLICK HERE
Prestige Consumer Healthcare is a company which markets and distributes over the counter healthcare products to mass merchandisers, drug, food, convenience stores and E-commerce channels in North America, Australia, Canada and Other International Markets. The company’s brand portfolio consists of 70 brands with 10 brands having the highest market share.
The company has had to shift its distribution system to focus on E-commerce as consumers have continuously moved online. Prestige has made several Omnichannel investments Amazon, Walmart, Target and Instacart resulting in consumer interest in features like Click-and-Collect and a broad array of online retailers. The early investments made in E-commerce has resulted in growth across the channel. In 2021, the company doubled sales from E-commerce channels, with 11% of sales as compared to 5% in 2020.
Management aims for long term organic revenue growth of around 3% per year. The company is continuing its brand building operation through various channel development opportunities and leveraging long standing brand heritage with focused digital and content marketing. The company is also developing and understanding consumer insights and creating flexible brand strategies focused on growing categories.
The company’s marketing strategy is focused primarily on consumer-focused programs which include targeted in store programs and digital advertising. PBH releases new products to the market each year to bolster its organic growth, fortify positions of its leading brands, and carve out market share in new categories. The company also fuels growth through acquisitions which are complementary to the existing portfolio of brands. The company has the necessary infrastructure to realise significant synergies through redundant cost eliminations.
Financials and Valuation
PBH saw revenues decline in 2020 as the consumption headwinds induced by the Covid-19 pandemic disrupted various categories. The company’s revenue growth has failed to meet the company’s target for the last three years. Furthermore, the company has also reduced its revenue guidelines for 2022 with organic growth being projected at around 1.5%-2%.
The company’s acquisition strategy also means that it has incurred significant debt over the last few years. The company’s debt now stands at $1.5 billion, with the company’s net debt-to-EBITDA ratio standing at 4.2x. The company is also planning an acquisition of Akron, which is expected to significantly raise debt.
The company has consistently generated over $200 million in free cash flow over the last five years, which the company has used to repurchase shares. The company is currently trading at a P/S of 2.78, which is much lower than the industry average of 8.44. While the valuations are currently reasonable, the market is discounting PHB’s ability to deliver strong revenue growth in the future.
PBH has a diverse set of brands in its portfolio and is continuing to expand its operations through an Omnichannel presence in retail and e-commerce, especially as consumers have been switching to buy healthcare products online. But there are various red flags surrounding the company’s financials, especially with revenues stagnating over the last few years. The company’s inability to meet its revenue target, coupled with levered acquisitions is creating stress on the company’s balance sheet, which poses as a significant investment risk to potential shareholders.
Prestige Consumer Healthcare is an American company that distributes branded over-the-counter healthcare and household cleaning products to mass merchandisers, drugstores, convenience stores, supermarkets, and e-commerce channels. The firm's major brands include BC/Goody's, Chloraseptic, Clear Eyes, Compound W, Debrox, Dramamine, Fess, Fleet, Gaviscon, Hydralyte, Monistat, Nix, and Summer's Eve. The company's portfolio includes branded products in women's health, gastrointestinal, analgesics, eye and ear care, dermatological products, oral care, skincare, sleep aids, and cough and cold. Prestige has customers in the United States, Canada, and Australia.