HELE Stock Study (6-6-24)

I recently did a stock study on Helen Of Troy Ltd. (HELE) with a closing price of $104.69.

M* writes:

     > Helen Of Troy Ltd is a consumer products company offering creative
     > products and solutions for its customers through a diversified
     > portfolio of brands. It has two operating segments: Home & Outdoor
     > segment provides a broad range of consumer products for home
     > activities such as food preparation, cooking, cleaning, and
     > organization; as well as products for outdoor and on-the-go
     > activities such as hydration, food storage, backpacks, and travel
     > gear, and The Beauty & Wellness segment provides beauty and
     > wellness products including mass and prestige market beauty
     > appliances, prestige market liquid-based hair and personal care
     > products, and wellness devices including thermometers, water and
     > air filtration systems, humidifiers, and fans.

Over the last 10 years, this large-size company has grown sales and earnings at annualized rates of 4.9% and 8.1%, respectively. Lines are generally up and parallel but not so straight with YOY sales declines in ’17, ’18, ’23, and ’24 along with YOY EPS declines in ’16, ’18, ’20, ’22, and ’23 (FY ends Feb 29; references to year at BI and Value Line incremented to align).

I feel iffy as to whether this passes visual inspection. 10-year R^2 is 0.78 for sales and 0.53 for EPS. I have seen the stock on Value Line’s Timely list enough over the years to find it of personal interest. If only for that reason, I will proceed with the analysis while being additionally careful to boost margin of safety (MOS) wherever possible.

Over the last decade, PTPM trails industry averages while leading peers by ranging from 7.8% in ’16 to 12.8% in ’21 with a last-5-year average of 10.6%. ROE is comparable to industry and peer averages while ranging from 9.8% in ’23 to 20.3% in ’21 with a last-5-year mean of 14.0%. Debt-to-Capital is less than industry and peer averages while ranging from 22.2% in ’18 to 40.1% in ’16 with a last-5-year mean of 31.4%.

Quick Ratio per Value Line is (843.9 – 396) / 450.8 = 0.99 and Interest Coverage is 24.6. Value Line gives a B++ rating for Financial Strength.

With regard to sales growth:

• YF projects YOY 0.6% contraction for ’25 and 2.8% growth for ’26 (based on 6 analysts).
• Zacks projects YOY 0.8% contraction for ’25 and 2.0% growth for ’26 (3 analysts).
• Value Line projects 8.4% growth per year from ’24-’29.
• CFRA projects 0.6% YOY contraction for ’25 and growth of 1.1% per year from ’24-’26 (6).
• M* gives a 2-year annualized ACE of 1.2%.

I am forecasting much closer to the short-term projections at 2.0% per year.

With regard to EPS growth:

• MarketWatch projects 6.5% and 10.9% per year for ’24-’26 and ’24-’27, respectively (based on 7 analysts).
• Nasdaq.com projects 11.7% YOY and 3.1% per year for ’26 and ’25-’27 [4/4/1 analyst(s) for ’25/’26/’27].
• Seeking Alpha projects 4-year annualized growth of 8.0%.
• YF projects YOY 0.9% and 10.6% for ’25 and ’26, respectively (6), along with 5-year annualized growth of 8.0%.
• Zacks projects YOY 0.3% and 8.7% for ’25 and ’26, respectively (4), along with 5-year annualized growth of 8.0%.
• Value Line projects 11.0% per year from ’24-’29.
• CFRA projects 28.0% YOY and 19.0% per year for ’25 and ’24-’26 respectively (6).
• M* provides an annualized long-term ACE of 8.0%.

Four long-term estimates are exactly 8.0% thereby raising my suspicion of data duplication (same analysts). I will apply a 25% haircut to that to get my 6.0% annualized forecast. Initial value is ’24 EPS of $7.03/share.

My Forecast High P/E is 18.0. Over the past decade, high P/E gradually increases from 17.7 (’15) to 20.4 (’24) with a last-5-year mean of 29.0 and a last-5-year-mean average P/E of 22.0. I am near the bottom of the range (only ’15 is lower).

My Forecast Low P/E is 11.4. Over the past decade, low P/E ranges from 10.3 in ’21 to 21.3 in ’16 with a last-5-year mean of 15.0. I am forecasting near the bottom of the range (only ’21 is lower).

My Low Stock Price Forecast (LSPF) of $80.10 is default given the initial value from above. This is 23.5% less than the previous close and 8.5% less than the 52-week low.

These inputs land HELE in the HOLD zone with a U/D ratio of 2.6. Total Annualized Return (TAR) is 10.1%.

PAR (using Forecast Average—not High—P/E) is less than I like to see for a medium-size company at 5.7%. If a healthy MOS anchors this study, then I can proceed based on TAR instead.

To assess MOS, I compare my inputs with those of Member Sentiment (MS). Based on only 11 studies done in the past 90 days (my study and 4 outliers excluded), averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, and Forecast Low P/E are 8.2%, 8.0%, 21.0, and 13.4, respectively. I am lower across the board. Value Line projects a future average annual P/E of 15.0 that is less than MS (17.2) and greater than mine (14.7).

MS high / low EPS are $10.33 / $7.05 versus my $9.41 / $7.03 (per share). My high EPS is less due to a lower growth rate. Value Line’s high EPS of $15.00 is much greater than both.

MS LSPF of $72.00 implies a Forecast Low P/E of 11.5 versus the above-stated 13.4. MS LSPF is 14.2% less than the default $7.05/share * 13.4 = $94.47, which results in more conservative zoning. MS LSPF is 1.3% greater than mine, however.

TAR (over 15.0% preferred) is less than MS 17.1%. Despite the tiny MS sample size, I believe MOS to be robust due to consistent efforts to undercut the range with my inputs.

Turning to valuation, PEG is 1.5 and 2.3 per Zacks and my projected P/E, respectively: both somewhat overvalued. Relative Value [(current P/E) / 5-year-mean average P/E] is cheap at 0.67.

U/D has HELE a Buy under $102/share while the BI TAR criterion will be satisfied ~$85 given a forecast high price over $169. Position size may be lower should you categorize as a speculative (non-core) investment.