News

Jun 29, 2023

Edgewell Personal Care (NYSE:EPC) jumps 6.1% this week, though earnings growth is still tracking behind three

Stock Analysis One simple way to benefit from the stock market is to buy an index fund. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market

Stock Analysis

One simple way to benefit from the stock market is to buy an index fund. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. For example, the Edgewell Personal Care Company (NYSE:EPC) share price is up 46% in the last three years, clearly besting the market return of around 28% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 2.2% in the last year , including dividends .

The past week has proven to be lucrative for Edgewell Personal Care investors, so let's see if fundamentals drove the company's three-year performance.

Check out our latest analysis for Edgewell Personal Care

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Edgewell Personal Care was able to grow its EPS at 12% per year over three years, sending the share price higher. We note that the 13% yearly (average) share price gain isn't too far from the EPS growth rate. Coincidence? Probably not. This observation indicates that the market's attitude to the business hasn't changed all that much. Rather, the share price has approximately tracked EPS growth.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

We know that Edgewell Personal Care has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Edgewell Personal Care's TSR for the last 3 years was 52%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

Edgewell Personal Care shareholders are up 2.2% for the year (even including dividends). But that return falls short of the market. But at least that's still a gain! Over five years the TSR has been a reduction of 4% per year, over five years. So this might be a sign the business has turned its fortunes around. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Edgewell Personal Care (at least 1 which is a bit unpleasant) , and understanding them should be part of your investment process.

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.

What are the risks and opportunities for Edgewell Personal Care?

NYSE:EPC

Edgewell Personal Care

Edgewell Personal Care Company, together with its subsidiaries, manufactures and markets personal care products worldwide.Show more

Rewards

Trading at 5.3% below our estimate of its fair value

Earnings are forecast to grow 13.44% per year

Earnings grew by 7.4% over the past year

Risks

Debt is not well covered by operating cash flow

Significant insider selling over the past 3 months

Share Price

Market Cap

1Y Return

Further research onEdgewell Personal Care

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Edgewell Personal Care Company, together with its subsidiaries, manufactures and markets personal care products worldwide.

Undervalued with proven track record.