A question dated July 23 had this portion of an analyst's opinion on PBH:
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.
~~~~~~~~~~~~~~~~~
Does this defy logic, gravity or both? Can a stock that has been dead money for more than 5 years more than double in a year and a half? The $140 target seems optimistic, but over $200 is mind boggling.
Thanks,
Greg
Keep in mind that some analysts like to stick their neck out. If things work out as expected, they are heroes. We have seen much more aggressive price target moves in our time. But, seriously, a sentiment shift can be very powerful. Celestica stock was a basket case for a decade or so, before it put together strong results at the exact same time as there was a sentiment shift in the sector. It's now up 2,300% in five years. PBH is certainly not as 'sexy', but recent results have been solid, and EPS is expected to growh nicely. Leverage has held back the stock. If we could magicall make leverage disappear, the stock likely has a 50% gain. A split of the company is not magic (as of course revenue/earnings are impacted) but we still think it would have quite a positive impact to the company if leverage was reduced. PBH has growth potential, but lacks the capital capacity to really accelerate. We would agree the target is too aggressive. But such proposed corporate moves would still be seen as very positive overall.