Sector financial performance:
This company, primarily a manufacturer, marketer, and distributor of consumer packaged products including personal care, foods, home care, and refreshment, has been grouped into consumer products-personal care sector in personal care industry.
It seems that demand for products of companies in this sector has been very strong in the past three years as indicated by continuing increase in both sales volume and price for the typical companies ( sales volume growth rate : 0.8-1.5%; organic sales growth rate: 1.7%-3.3%). While sensitive to price, the developing markets contribute significantly to the growth in sales. However, those growths have not completely been reflected in companies’ performance as a result of unfavourable US dollars. We have seen strongest growth in demand in oral product category.
It seems that the distribution channels, probably determined by brands and market concentration, matter in the currently unfavourable retail industry environment. Sales decreased significantly for some less recognised brands, which usually have less control on distribution of their products.
Sales increase has resulted in improved margins according to some typical company’s data. The typical companies’ gross margin is about 51% in 2017. With a slight increase in SG&A as percentage of sales (about 30% in 2017), the typical operating margin went up to about 21% in 2017.
The typical average stock price/cash flow ratio is about 23.
It seems that the demand for products of this company has been strong and growing driven by its increase in sales of developing market. It seems that this company has been able to find a balance in raising price and gaining increase in sales volume in developing markets and it may have a little trouble in developed market in doing the same thing probably due to less strong demand.
The fiscal 2017 compared with the 2016
Organic sales (excluding currency and acquisition) increased 3.1% primarily due to increase of 0.8% in volume and increase of 2.3% in price. Developed markets sales decreased 0.6%.
The fiscal 2016 compared with 2015
Organic sales (excluding currency and acquisition) increased 3.7% primarily due to increase of 0.9% in volume and increase of 2.8% in price. Developed markets sales decreased.
Fiscal 2015 compared with 2014
Organic sales (excluding currency and acquisition) increased 4.1% primarily due to increase of 2.1% in volume and increase of 1.9% in price. Developed markets sales were flat.
Its gross margin has increased from around 41.5% in 2014 up to about 43% of 2017 due to rising price. Its operating margin thus was flat at about 17% in 2017 due to a slightly higher SG&A as percentage of sales (about 23% at 2017).
This stock currently has a stock price/cash flow ratio of 22. We think that its stock is being relatively undervalued compared with its peers.
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