Promisia Integrative Limited (NZSE:PIL), a NZD$14.76M small-cap, operates in the consumer staples industry which has been a consistent performer over time, due to its robust consumer demand throughout economic cycles. However, a structural shift for the personal product industry, in particular, is the growth in consumer power. Consumers now have easy access to information about prices, offers and product characteristics. This leads to companies, such as PIL, needing to refine and differentiate products to meet customer needs and compete effectively. Consumer staple analysts are forecasting for the entire industry, a fairly unexciting growth rate of 8.24% in the upcoming year, and a massive growth of 36.86% over the next couple of years. This rate is larger than the growth rate of the NZ stock market as a whole. An interesting question to explore is whether we can we benefit from entering into the personal product sector right now. Below, I will examine the sector growth prospects, as well as evaluate whether PIL is lagging or leading its competitors in the industry. View our latest analysis for Promisia Integrative
What’s the catalyst for PIL’s sector growth?
Growth in the personal product sector has been driven by structural shifts in the way companies innovate in order to meet the needs of changing consumer tastes, and the growing engagement and interaction with customers via e-commerce channels. In the past year, the industry delivered growth in the teens, beating the NZ market growth of 10.65%. PIL leads the pack with its impressive earnings growth of 56.65% over the past year. This proven growth may make PIL a more expensive stock relative to its peers.
Is PIL and the sector relatively cheap?
The personal product sector’s PE is currently hovering around 23x, above the broader NZ stock market PE of 14x. This means the industry, on average, is relatively overvalued compared to the wider market. However, the industry did return a higher 19.10% compared to the market’s 12.65%, which may be indicative of past tailwinds. Since PIL’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge PIL’s value is to assume the stock should be relatively in-line with its industry.
What this means for you:
Are you a shareholder? PIL recently delivered an industry-beating growth rate in earnings, which is a positive for shareholders. If you’re bullish on the stock and well-diversified by industry, you may decide to hold onto PIL as part of your portfolio. However, if you’re relatively concentrated in personal products, you may want to value PIL based on its cash flows to determine if it is overpriced based on its current growth outlook.
Are you a potential investor? If PIL has been on your watchlist for a while, now may be the time to enter into the stock, if you like its ability to deliver growth and are not highly concentrated in the personal products industry. However, before you make a decision on the stock, I suggest you look at PIL’s future cash flows in order to assess whether the stock is trading at a reasonable price, as well as other important fundamentals such as the company’s financial health in order to build a holistic investment thesis.
For a deeper dive into Promisia Integrative’s stock, take a look at the company’s latest free analysis report to find out more on its financial health and other fundamentals. Interested in other consumer staples stocks instead? Use our free playform to see my list of over 100 other consumer staples companies trading on the market.
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