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Up 2x from its low in March 2020, at the current price of $222 per share, we believe Helen of Troy stock (NASDAQ: HELE) has further upside potential. Helen of Troy, a manufacturer of houseware, and health & beauty products, has seen its stock rise from $111 to $222 off its March 2020 low, a little more than the S&P which increased by around 90% from its lows. Further, the stock is up a little less than 20% from the level it was at before the pandemic. We believe that Helen of Troy stock could rise almost 20% to regain its early-2021 highs of $265, driven by expectations of steady demand growth, and strong full-year 2021 earnings. Our dashboard What Factors Drove 24% Change In Helen of Troy Stock Between 2019 And Now? has the underlying numbers behind our thinking.
Stock Prices
Helen of Troy stock’s rise since late 2019 came due to a 23% rise in revenue from $1.71 billion FY 2020 to $2.1 billion in FY 2021 (HELE’s fiscal year ends in February). Lower operating expenses and a marginally lower effective tax rate saw net margins rise from 8.9% to 12.1% over this period. Combined with a relatively unchanged outstanding share count, EPS (earnings-per-share) rose from $6.06 to $10.16.
However, HELE’s P/E (price-to-earnings) multiple rose from 28x at the end of 2019 to 37x in late 2020, but has since dropped to 22x currently. We believe that the company’s P/E ratio has the potential to rise further in the near term on expectations of continuing demand growth and a favorable shareholder return policy, thus driving the stock price higher.
Where Is The Stock Headed?
The global spread of coronavirus and the resulting lockdowns has led to people focusing more on their home life and personal health, and this trend has continued despite the economies opening up. This has clearly benefited Helen of Troy, as is evident from their full-year 2021 results. Revenue came in at $2.1 billion, up from $1.71 billion in FY 2020. Asset impairment and restructuring charges came in around $36 million lower compared to FY 2020, and this helped boost operating income to $281.5 million in FY ’21, up from $178 million. The effective tax rate dropped to 5.7%, down from 8.2% in FY 2020, and this further helped boost EPS, which rose to $10.16 from $6.06.
Going forward, we believe demand for the company’s products will stay strong, and that revenues stand to benefit further in the near-to-medium term. Additionally, if the company can continue controlling operating expenses going forward, a rise in investor expectations could drive up the company’s P/E multiple, helping the stock regain its early-2021 highs of $265, an upside of around 20% from present levels.
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