Insider activity and recent stock performance

Aqua Capital, Ltd, a 10% owner of Energizer Holdings (ENR), recently purchased 40,000 shares, adding to an already large position that now stands at 7,340,000 shares and is valued at about US$154.80 million.

Separately, director Robert V. Vitale received 1,399 Phantom Stock Units, which are economically tied to Energizer Holdings stock and will convert into common shares when his Board service concludes.

Against this insider buying backdrop, Energizer Holdings’ share price has climbed over the past quarter, with a 90 day share price return of 29% and a 30 day share price return of 11.88%, while the 1 year total shareholder return of 7.28% contrasts with weaker 3 and 5 year total shareholder returns.

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So with Energizer Holdings stock up sharply in the last quarter, solid recent net income growth and insiders adding exposure, is there still mispricing here for long term investors, or is the market already banking on stronger growth ahead?

Preferred P/E of 7.6x: Is it justified?

Valuation signals around Energizer Holdings point to a stock that looks inexpensive on earnings, with the current price of $21.75 sitting well below several reference points investors often watch.

The preferred metric here is the P/E ratio, which for Energizer Holdings stands at 7.6x based on current earnings. For a consumer products company generating $2,980.3m of revenue and $195.1m of net income, P/E is a common shorthand for how much investors are willing to pay today for each dollar of earnings. A lower P/E can suggest the market is pricing in modest earnings growth, business risk, or other concerns, while a higher P/E tends to reflect stronger growth expectations or higher perceived quality.

According to the data, Energizer Holdings is described as trading at good value compared to peers and the wider industry, and its P/E of 7.6x sits well below an estimated fair P/E of 14.3x. That fair ratio level is where the market could move if perceptions of the company and its earnings profile were to align with the fair value model used here, given forecasts of 9.24% annual earnings growth and an expected return on equity that is described as very high in three years time.

On top of that, Energizer Holdings is also assessed as good value when lining up its 7.6x P/E against a peer average of 25.1x and the global Household Products industry average of 18.5x, which is a wide gap. Those comparisons suggest the market is currently placing a much lower multiple on Energizer Holdings earnings than on similar companies, despite the company having grown earnings very strongly over the past year and being forecast to continue growing, even if at a slower rate than the broader US market.

Result: Price-to-earnings of 7.6x (UNDERVALUED)

However, Energizer Holdings also carries risks, including 3- and 5-year total shareholder returns that have fallen sharply, and annual revenue growth of 1.67% that may limit re-rating.

Another view on Energizer Holdings using our DCF model

The earnings multiple suggests Energizer Holdings looks cheap, but the SWS DCF model goes much further, estimating a future cash flow value of $96.73 per share versus the current $21.75. That is a very wide gap. This raises a key question: is the market missing something, or is the model too optimistic?

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Energizer Holdings for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 44 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

With Energizer Holdings showing both appealing valuation signals and some clear question marks, it makes sense to move quickly, review the underlying data, and form your own judgment by weighing its 5 key rewards and 2 important warning signs

Looking for more investment ideas beyond Energizer Holdings?

If Energizer Holdings has sharpened your focus on valuation and quality, do not stop here. Broaden your watchlist now so potential opportunities do not pass you by.

• Target reliable compounders by checking companies offering resilient income streams through 7 dividend fortresses. These could complement a stock like Energizer Holdings in a diversified portfolio.
• Spot potential mispricings early by scanning screener containing 18 high quality undiscovered gems before they appear on everyone else's radar and crowd into the mainstream.
• Reduce portfolio stress by focusing on sturdier businesses using the 74 resilient stocks with low risk scores so short term swings feel less like a shock and more like background noise.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.