Energizer’s stock price has taken a beating over the past six months, shedding 29.5% of its value and falling to $24.26 per share. This was partly due to its softer quarterly results and may have investors wondering how to approach the situation.
Is now the time to buy Energizer, or should you be careful about including it in your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.
Why Is Energizer Not Exciting?
Even with the cheaper entry price, we're swiping left on Energizer for now. Here are three reasons why we avoid ENR and a stock we'd rather own.
1. Core Business Falling Behind as Demand Plateaus
When analyzing revenue growth, we care most about organic revenue growth. This metric captures a business’s performance excluding one-time events such as mergers, acquisitions, and divestitures as well as foreign currency fluctuations.
The demand for Energizer’s products has barely risen over the last eight quarters. On average, the company’s organic sales have been flat. 
2. Projected Revenue Growth Is Slim
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect Energizer’s revenue to rise by 1.4%. While this projection indicates its newer products will catalyze better top-line performance, it is still below the sector average.
3. Free Cash Flow Margin Dropping
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
As you can see below, Energizer’s margin dropped by 4.6 percentage points over the last year. If its declines continue, it could signal increasing investment needs and capital intensity. Energizer’s free cash flow margin for the trailing 12 months was 6.1%.
Final Judgment
Energizer’s business quality ultimately falls short of our standards. Following the recent decline, the stock trades at 6.6× forward P/E (or $24.26 per share). While this valuation is optically cheap, the potential downside is big given its shaky fundamentals. We're fairly confident there are better investments elsewhere. We’d suggest looking at our favorite semiconductor picks and shovels play.
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