Thanks as always
We like both names, and we think the two companies are quite on par in terms of quality. But there are differences in growth rates, valuation and expsoure and strategy.
PBH is trading at 22.7x Forward P/E, with a strategy that fuels growth through acquisitions, PBH did not do quite well in the last few years largely due to starting out at quite a premium multiple. Covid also hurt it much more than ATD. Going forward we think PBH could do fine, however, and it has shown good recent momentum. ATD is trading at 17.5x Forward P/E, and capital allocation is prioritized for moderate store expansion, and significant share repurchases, ATD is trading at a reasonable multiple, and we would expect ATD to continue perform well from this level. It has lots of dry powder for acquisitions if they present themselves.
We like both names and would be comfortable owning both. But for an investor seeking to reduce risk, ATD is the one to keep if only one.