The Street Owes Helen of Troy an Apology
Given Helen's breadth of end-market exposure, which includes housewares, personal care, health care/home segment, water filtration and so on, I do understand analysts concerns regarding organic growth, which measures a company's operational performance using only internal resources and excluding events like acquisitions, is an important metric used to gauge performances of companies that are so well diversified.
It's rare that companies like Helen can enter so many markets without going the mergers and acquisitions route. While there's nothing wrong with that, one acquisition (or two) can add an immediate boosts to the acquirer's revenue performance, making management appear way more competent than they really are.
While I've always maintained a strong bias towards organic growth, in the case of Helen it's been exaggerated and in some instances overblown to downplay the company's performance. When compared to, say, Proctor & Gamble
The other thing analysts conveniently forget is that even though this company is often accused of growing solely by acquisitions, management must still execute. It's one thing to spend billions on a deal. But at the end of the day, the deal must still work from the standpoint of synergies in order for value to be extracted.
On Thursday, the company will report results for its fiscal third-quarter. Management must convince investors that they have a solution to secure more business from not only Proctor & Gamble but also from the likes of Unilever
The Street will be looking for $1.09 in earnings per share on revenue of $378.9 million, which would represent revenue growth of (just) 1.1%. But don't let that number fool you. While the revenue result in absolute terms may appear underwhelming, it will also represent sequential growth of close to 20%. And that was from a strong October quarter that yielded record revenue of $320 million.
Given the Street's unyielding position about competitive pressures, Investors should also focus more on Helen's segmental performances. This is where I've become convinced that the company does have a well-structured operation that is suited to fight off these sort of attacks, as perceived as they may be.
Now, I don't want to downplay the capabilities of Proctor & Gamble or Unilever, which have posted performance I believe are equally impressive. But with Helen of Troy having posted growth in every business segment last quarter, including 20% growth in the Healthcare/Home Environment segment, I struggle to find the dents from all of these attacks.