PBH continues to be a very frustrating stock which we bought for a RRIF and a TFSA. Even though 5i rates it as a “B” and most analysts rate it highly, for those of us who purchased it when it was trading at much loftier levels, what is it going to take for at least a break-even position?
In the case of the RRIF, PBH was purchased for 96.24 per share. It closed on January 9 with a price of $79.26. When dividends are included, our loss is still $3900.
National Bank rates PBH as “sector perform” with a target price of $99.00. On the 5i website, the stock is trading in a range of $75.67 (year low) and $97.10 (year high). Even with all the positive news surrounding PBH (acquisitions, etc.), the stock is retreating to only $3.59 above its year low.
I read recently that beef prices are at an all-time high. The CBC had a story called “Beef prices hit record high at the grocery store — and on the ranch, too”. Is this somehow holding back PBH?
Is PBH a stock worth holding? Are there any tailwinds on the horizon that could lift PBH out of the doldrums?
Thanks as always for helping me to make informed decisions.
PBH has been in an investment cycle in recent years, which depressed free cash flow for some time, as well as its share price. PBH is trading at 17x Forward P/E; the share price has been flat for the last five years as its multiples slightly compressed from 18.6x to 17x, which is not expensive on an absolute basis. We think the key catalyst for the share price to recover from here would be an inflection in free cash flow (reduction in capex). Investors need some patience with this name, as management indicates that capex likely peaked in FY2024 and is likely to come down meaningfully in FY2025.
In addition, investors need to stay rational as the share price one paid for in the past has nothing to do with whether investors should sell now or hold until it breaks even. What matters most is the company’s future prospects and whether its risk/reward is attractive enough.