Why Energizer Holdings Is Drawing Fresh Attention

Energizer Holdings (ENR) is back on investors’ radar after a recent stretch of positive stock performance, with the share price moving higher over the past week, month, and past 3 months.

Beyond the recent bounce, Energizer Holdings shows a 30 day share price return of 18.98% and a 1 year total shareholder return of 3.69%. However, the 3 and 5 year total shareholder returns are materially weaker, suggesting recent momentum is building off a lower base.

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With Energizer trading close to analyst targets yet showing a very large modelled intrinsic discount, the key question is whether the recent rebound still leaves the stock undervalued or if the market is already factoring in future growth.

Price-to-Earnings of 7.1x: Is It Justified?

On a P/E of 7.1x, Energizer looks inexpensive compared with both its own earnings profile and other household products stocks, even after the recent share price rebound.

The P/E ratio measures what investors are currently paying for each dollar of earnings. It therefore links directly to a company’s profitability and how confident the market is in those earnings persisting.

For Energizer, earnings growth over the past year has been very large and has also been stronger than its 5 year average. Yet the stock trades on a P/E well below both the global household products industry average of 16.8x and the peer average of 23.6x. Against an estimated fair P/E of 13.1x, the current 7.1x suggests the market is pricing the company at a level the ratio could reasonably move away from over time if earnings trends stay supportive.

Result: Price-to-Earnings of 7.1x (UNDERVALUED)

However, recent weakness in 3- and 5-year returns and Energizer’s large exposure to mature battery and auto care categories could still cap how the market values the stock.

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Another Way to Look at Value

While a 7.1x P/E points to an inexpensive stock, the SWS DCF model paints an even starker picture, with Energizer trading at $20.25 versus an estimated future cash flow value of $89.64. That gap suggests a very large implied discount, so which signal should you trust more?

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

Mixed signals or an opportunity hiding in plain sight? If this move has your attention, take a closer look at both sides of the story and weigh up the 5 key rewards and 2 important warning signs

Looking for more investment ideas?

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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.