4 Consumer Businesses to Keep on Your Radar
Josh is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
With consumer spending representing 71% of the United State's overall GDP in 2013, it has become more important than ever for investors to find companies with strong brands that are able to lock in recurring sales. Companies that sell basic staples to many, if not most households throughout the world, can offer peace of mind to investors in a dramatic market.
From low interest rates, to all-time highs, to Mr. Bernanke seemingly spewing volatility upon us, it has become pivotal for investors to block out the noise and focus on finding quality consumer businesses.
|Company||P/E||FP/E||P/FCF||10 Yr. Rev. Growth||10 Yr. EPS Growth||Dividend %|
Procter & Gamble
Helen of Troy
Source: Bloggers calculations
A lesson in emerging markets
Offering the highest dividend yield and 10 year EPS growth rates of the group, food storage champion Tupperware offers income investors a very appealing opportunity. With 61% of the company's overall sales coming from emerging markets, Tupperware looks to continue its growth in these up and coming markets, which grew sales by 11% in 2012. While Tupperware's emerging market segment already outweighs its established market category, emerging markets represent 86% of the world's population, leaving the company a largely unsaturated market.
Along with its overall globalization trends, Tupperware is rapidly becoming a major player in the beauty space, with its Beauty and Personal Care Products segment now accounting for 24% of the company's revenues. Known for its innovation -- with 25% of its sales coming from products created in the previous 2 years -- the company's new beauty segment could be a huge benefit if it continues to innovate and stay ahead of current trends.
Stability is the key
With the second largest dividend of the group, Proctor & Gamble offers investors safety in its 26 $1 billion brands. Ranging from Crest and Tide to Bounty and Charmin, Proctor & Gamble is one of the steadiest companies out there. However, with only 40% of its sales footprint coming from emerging markets, the company has a ton of market share still to capture internationally.
Regardless, it's the biggest company of its industry in the emerging markets space, with over $33 billion in sales during 2012. Compared to Unilever at $23 billion and Colgate at $10 billion, Proctor & Gamble has quite a head start on its competition and has gained the first mover advantage in many categories.
With all the recent drama surrounding Bill Ackman, the company has seen its stock price sputter as CEO Bob McDonald stepped down and A.G. Lafley moved in. As the stock slid down, its Price/Sales and Price/Free Cash Flow began to approach its 10 year averages of 2.6 and 15.3 respectively. While the company is not cheap by any means, this could be a solid entry point for a long-term investor.
The transformation of a giant
Energizer has aligned its operations beautifully as it looks to penetrate the personal care space. With a secular decline haunting overall battery sales, management began to diversify business operations by tacking on some big name personal care products. With brands like Schick, Edge, Playtex, Skintimate, Wet Ones, and even Banana Boat, Energizer saw its new personal care segment grow 17% in 2012. Accounting for 54% of the company's overall sales and profits, one could argue that Energizer has re-branded itself as a personal care company.
As the company continues to sell off some of its battery related assets, it continues to look for new brands to add to its growing list of quality holdings. While the company's Energizer battery sales are in decline, it is still in a leading position in the industry and is able to generate a profit, giving the company a strong core business. All in all, with a new 1.6% dividend being offered to shareholders and a strong portfolio of personal care brands, Energizer seems to be investing in the long-term future, a great sign for any Foolish investor.
A great valuation
While Helen of Troy does not offer a dividend, it offers the best valuation of the group. With an arsenal of brands that it has acquired over the years, it has developed some very strong positions in its industry. In the last decade alone, the company has picked up Pur, Pert Plus, Sure, Belson, OXO, and Brut. Today the company's top 13 brands account for over 80% of its overall sales.
Currently the company trades at just 1.3 times book value and 1 times its sales, both of which are below 10 year averages. With 79% of sales coming from the United States, Helen of Troy has huge upside in international markets, as it looks to expand in 24 countries and distribute products to 50 more. Holding the highest 10 year revenue growth rate of the 4 companies, Helen of Troy will look to hoard its cash and make a major splash in the acquisition arena.
Foolish final thoughts
While each of these consumer companies offer huge potential upside to investors, it's pivotal for you to do your own research and invest in what helps you sleep at night. If you believe in the globalization trend, Tupperware or Proctor & Gamble might be for you with their 3% dividends. However, if top line growth is what you seek, up and coming Helen of Troy or transforming Energizer might fit your style.
Regardless, I see major long-term upside in all 4 companies -- so much so that I gave each of them an outperform call on CAPS -- and I look forward to following their progress and potentially adding them to my own portfolio.
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Josh Kohn-Lindquist has no position in any stocks mentioned. The Motley Fool recommends Energizer Holdings and Procter & Gamble. The Motley Fool owns shares of Tupperware Brands. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!