KVUE Shares Sink 7.5% In A Day, Now Is Not The Time To Buy The Stock
We believe there are several things to fear in KVUE stock given its overall Weak operating performance and financial condition. This isn’t appropriately reflected in the stock’s Moderate valuation which is why we think it is Unattractive. Here is our multi-factor assessment.
| CONCLUSION | |
|---|---|
| What you pay: | |
| Valuation | Moderate |
| What you get: | |
| Growth | Very Weak |
| Profitability | Moderate |
| Financial Stability | Moderate |
| Downturn Resilience | N/A |
| Operating Performance | Weak |
| Stock Opinion | Unattractive |
But no matter how attractive, investing in a single stock carries high risk. Trefis High Quality Portfolio and is designed to reduce stock-specific risk while giving upside exposure
Let’s get into details of each of the assessed factors but before that, for quick background: With $33 Bil in market cap, Kenvue is the largest pure-play consumer health company by revenue, leveraging science and digital capabilities to empower 1.2 billion people to live healthier lives daily.
[1] Valuation Looks Moderate
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| KVUE | S&P 500 | |
|---|---|---|
| Price-to-Sales Ratio | 2.2 | 3.3 |
| Price-to-Earnings Ratio | 24.0 | 24.0 |
| Price-to-Free Cash Flow Ratio | 20.8 | 21.1 |
This table highlights how KVUE is valued vs broader market. For more details see: KVUE Valuation Ratios
[2] Growth Is Very Weak
- Kenvue has seen its top line shrink at an average rate of -0.9% over the last 3 years
- Its revenues have fallen -2.2% from $15 Bil to $15 Bil in the last 12 months
- Also, its quarterly revenues declined -4.0% to $3.8 Bil in the most recent quarter from $4.0 Bil a year ago.
| KVUE | S&P 500 | |
|---|---|---|
| 3-Year Average | -0.9% | 5.3% |
| Latest Twelve Months* | -2.2% | 5.1% |
| Most Recent Quarter (YoY)* | -4.0% | 6.1% |
This table highlights how KVUE is growing vs broader market. For more details see: KVUE Revenue Comparison
[3] Profitability Appears Moderate
- KVUE last 12 month operating income was $2.6 Bil representing operating margin of 17.4%
- With cash flow margin of 13.8%, it generated nearly $2.1 Bil in operating cash flow over this period
- For the same period, KVUE generated nearly $1.4 Bil in net income, suggesting net margin of about 9.4%
| KVUE | S&P 500 | |
|---|---|---|
| Current Operating Margin | 17.4% | 18.6% |
| Current OCF Margin | 13.8% | 20.3% |
| Current Net Income Margin | 9.4% | 12.7% |
This table highlights how KVUE profitability vs broader market. For more details see: KVUE Operating Income Comparison
[4] Financial Stability Looks Moderate
- KVUE Debt was $8.7 Bil at the end of the most recent quarter, while its current Market Cap is $33 Bil. This implies Debt-to-Equity Ratio of 25.7%
- KVUE Cash (including cash equivalents) makes up $1.1 Bil of $27 Bil in total Assets. This yields a Cash-to-Assets Ratio of 3.9%
| KVUE | S&P 500 | |
|---|---|---|
| Current Debt-to-Equity Ratio | 25.7% | 21.0% |
| Current Cash-to-Assets Ratio | 3.9% | 7.0% |
[4] Downturn Resilience Is N/A
KVUE has fared much worse than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.
The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – S&P 500, Russell, and S&P midcap. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.