Despite Weak Spots, Edgewell Personal Care Company Is An Attractive Opportunity

Core Viewpoint - Edgewell Personal Care Company is considered a value investment opportunity despite mixed financial results, with a current rating of 'buy' due to its attractive stock price and potential for upside growth [1][17]. Financial Performance - For the third quarter of fiscal year 2024, Edgewell reported revenue of $647.8 million, a slight decline of 0.3% from $650 million in the previous year, primarily due to foreign currency fluctuations [2]. - Organic revenue actually grew by $4 million year-over-year, driven by a 6.1% increase in international markets, while North American sales fell by 2.4% due to lower volumes [2]. - Net income decreased from $53 million to $49 million, despite an increase in gross profit margin from 43.1% to 44.3% [4]. - Operating cash flow fell significantly from $166.4 million to $101.2 million, while EBITDA improved from $109.7 million to $117.2 million [5]. Historical Context - Edgewell experienced declining sales from 2014 to 2020, but began to improve in 2021 following a management plan focused on key growth opportunities [6]. - The Wet Shave segment saw revenue decline from $1.59 billion in 2014 to $1.16 billion in 2020, influenced by changing consumer preferences and the pandemic [10]. Segment Analysis - The Wet Shave segment accounted for 54.7% of total revenue in 2023, but has faced challenges, while the Sun and Skin Care segment has shown consistent growth since 2015 [11]. - The Sun and Skin Care operations benefited from organic growth of $142 million and acquisitions adding $97.4 million to revenue [11]. Market Trends - The global market for male-oriented sun and skin care products is projected to grow from $16 billion in 2023 to $29.6 billion by 2033, indicating a strong growth opportunity for Edgewell [11]. - The male grooming market in the U.S. was valued at $46.5 billion in 2022, with an expected annual growth rate of 8.3% from 2024 to 2030 [11]. Valuation Metrics - Management expects organic revenue growth of about 1% for the year, with adjusted earnings per share projected at $3, translating to net profits of $150.3 million [14]. - On a price-to-earnings basis, Edgewell appears fairly valued, but remains attractively priced relative to cash flows compared to similar companies [15]. Conclusion - Despite recent sales declines attributed to foreign currency issues, Edgewell's overall performance and market positioning suggest a positive outlook, justifying a 'soft buy' rating [17].