Prestige Consumer Healthcare (NYSE:PBH) pulls back 3.3% this week, but still delivers shareholders notable 17% CAGR over 3 years
Simply Wall St · 11/13 10:19

By buying an index fund, investors can approximate the average market return. But many of us dare to dream of bigger returns, and build a portfolio ourselves. For example, Prestige Consumer Healthcare Inc. (NYSE:PBH) shareholders have seen the share price rise 58% over three years, well in excess of the market return (11%, not including dividends).

Since the long term performance has been good but there's been a recent pullback of 3.3%, let's check if the fundamentals match the share price.

View our latest analysis for Prestige Consumer Healthcare

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During the three years of share price growth, Prestige Consumer Healthcare actually saw its earnings per share (EPS) drop 48% per year. In this instance, recent extraordinary items impacted the earnings.

So we doubt that the market is looking to EPS for its main judge of the company's value. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

It could be that the revenue growth of 6.7% per year is viewed as evidence that Prestige Consumer Healthcare is growing. In that case, the company may be sacrificing current earnings per share to drive growth, and maybe shareholder's faith in better days ahead will be rewarded.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

NYSE:PBH Earnings and Revenue Growth November 13th 2023

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

Prestige Consumer Healthcare shareholders are down 1.8% for the year, but the market itself is up 10%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 9% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Case in point: We've spotted 1 warning sign for Prestige Consumer Healthcare you should be aware of.

We will like Prestige Consumer Healthcare better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.