Yahoo Finance What Can We Expect for PZ Cussons Plc (LON:PZC) Moving Forward?
PZ Cussons Plc (LON:PZC), a UK£970m small-cap, operates in the household product industry, which supplies necessities to consumers. This means it is less sensitive to changes in the economic cycle given that demand remains relatively stable over time. Consumer staple analysts are forecasting for the entire industry, a relatively muted growth of 2.4% in the upcoming year , and an optimistic near-term growth of 27% over the next couple of years. However, this rate came in below the growth rate of the UK stock market as a whole. Below, I will examine the sector growth prospects, and also determine whether PZ Cussons is a laggard or leader relative to its consumer staples sector peers.
View our latest analysis for PZ Cussons
What’s the catalyst for PZ Cussons’s sector growth?
Growth in consumer power has been the underlying structural shift in the household product sector, as consumers now have easier access to information about prices, offers and product characteristics. This allows them to make well-informed decisions before purchasing a product. PZ Cussons and its peers face the challenge of further refining and differentiating their products to address customer needs as well as compete with each other on the basis of quality. Over the past year, the industry saw growth in the twenties, beating the UK market growth of 15%. PZ Cussons lags the pack with its negative growth rate of -24% over the past year, which indicates the company has been growing at a slower pace than its household products peers. However, the future seems brighter, as analysts expect an industry-beating growth rate of 20% in the upcoming year. This future growth may make PZ Cussons a more expensive stock relative to its peers.
Is PZ Cussons and the sector relatively cheap?
The household product industry is trading at a PE ratio of 16.34x, relatively similar to the rest of the UK stock market PE of 16.77x. This means the industry, on average, is fairly valued compared to the wider market – minimal expected gains and losses from mispricing here. However, the industry returned a higher 16% compared to the market’s 12%, potentially illustrative of past tailwinds. On the stock-level, PZ Cussons is trading at a PE ratio of 20.17x, which is relatively in-line with the average household products stock. In terms of returns, PZ Cussons generated 9.9% in the past year, which is 6.3% below the household products sector.
Next Steps:
PZ Cussons’s industry-beating future is a positive for shareholders, indicating they’ve backed a fast-growing horse. However, this high growth prospect is most likely factored into the share price, given the stock is trading in-line with its peers. If PZ Cussons has been on your watchlist for a while, now may be the time to enter into the stock. If you like its growth prospects, you’ll be paying a fair value for the company. However, if you’re hoping to gain from an undervalued mispricing, this is probably not the best time. However, before you make a decision on the stock, I suggest you look at PZ Cussons’s fundamentals in order to build a holistic investment thesis.
Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
Historical Track Record: What has PZC’s performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of PZ Cussons? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
