Q: What are your thoughts on PBH? TD released a research report on Friday, increasing its target price from $120 to $140 based on a stronger 2nd half of 2025. Buried in the report was the possibility of PBH divesting its Distribution Group and using the money to deleverage; in doing this, TD sees an implied share value of $205 to $225. See TD's comments below. Do you see the current price as a good entry point for PBH?
Which should drive significant deleveraging and could push the share price to $205-
225 by YE2026. Should PBH divest its Distribution Group, we think that PBH may first consider using the proceeds for debt reduction to both improve balance sheet flexibility and realize meaningful interest savings (i.e., ~75% of PBH's interest-bearing debt is floating rate), which should push total funded debt leverage down to 1.5x by the end of 2026, versus our current estimate of 2.5x. Assuming that 1) the Distribution Group is sold at a reasonable valuation and 2) the "new" PBH is re-rated back up to a trading range of 12-13x (i.e., historical ten-year average is ~12.5x; we are using 9.0x to derive our June 2026 target price of $140), we think that a hypothetical divestiture and subsequent debt repayment implies a share price anywhere between $205 to $225 at the end of 2026, ~50-60% above our current $140 target.
Which should drive significant deleveraging and could push the share price to $205-
225 by YE2026. Should PBH divest its Distribution Group, we think that PBH may first consider using the proceeds for debt reduction to both improve balance sheet flexibility and realize meaningful interest savings (i.e., ~75% of PBH's interest-bearing debt is floating rate), which should push total funded debt leverage down to 1.5x by the end of 2026, versus our current estimate of 2.5x. Assuming that 1) the Distribution Group is sold at a reasonable valuation and 2) the "new" PBH is re-rated back up to a trading range of 12-13x (i.e., historical ten-year average is ~12.5x; we are using 9.0x to derive our June 2026 target price of $140), we think that a hypothetical divestiture and subsequent debt repayment implies a share price anywhere between $205 to $225 at the end of 2026, ~50-60% above our current $140 target.
5i Research Answer:
We 'like' PBH and its recent momentum and growth is encouraging. IF it delevered its balance sheet we would like it a lot more. Thus, such a plan we think would be very beneficial to valuation over time. We would be fine buying this today for a long term investor, with a suggested entry $88.