Q: What am I missing about PBH: high crazy debt, low ROE, high P/R . High interest rates must be hurting them with all this debt. I never bought because it always seems expensive. My neighbour and his LP have held 7% shares for many years - bought low single digits. I should have listened to him all those many years ago - LOL.. Too expensive to buy now as I can get better returns in banks: capital and compounding dividends. Just curious on your comments. I thought ofd buying at $79.00 and, of course did not do so.
5i Research Answer:
Debt is high, with a debt-to-equity ratio of 1.5 and a net debt/EBITDA of 6.1X, and profit margins are thin, but management has successfully used debt to inorganically grow the company, and this is demonstrated through its top-line sales growth. The recent move comes alongside its reiteration of guidance for the year as well as a bit of valuation re-rating - its forward earnings multiple has expanded from 13X in late 2022 to 23X currently.
It has missed its last few earnings results, although, the price has continued to rise despite this. We feel that if its earnings are OK or better than expected in August, the stock could continue to climb as signs of peak interest rates and earnings growth appear.