Edgewell Personal Care has had an impressive run over the past six months as its shares have beaten the S&P 500 by 10.6%. The stock now trades at $27.57, marking a 23.3% gain. This performance may have investors wondering how to approach the situation.
Is there a buying opportunity in Edgewell Personal Care, or does it present a risk to your portfolio? See what our analysts have to say in our full research report, it’s free.
Why Do We Think Edgewell Personal Care Will Underperform?
We’re glad investors have benefited from the price increase, but we’re passing on Edgewell Personal Care for now. Here are three reasons why EPC doesn’t excite us, plus one stock we’d rather own.
1. Core Business Falling Behind as Organic Sales Decline
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.
Edgewell Personal Care’s demand has been falling over the last eight quarters, and on average, its organic sales have declined by 1.1% year on year. 
2. Shrinking Operating Margin
Operating margin is a key profitability metric because it accounts for all expenses enabling a business to operate smoothly, including marketing and advertising, IT systems, wages, and other administrative costs.
Looking at the trend in its profitability, Edgewell Personal Care’s operating margin decreased by 6.8 percentage points over the last year. Edgewell Personal Care’s performance was poor no matter how you look at it – it shows that costs were rising and it couldn’t pass them onto its customers. Its operating margin for the trailing 12 months was breakeven.
3. EPS Trending Down
Analyzing the long-term change in earnings per share (EPS) shows whether a company’s incremental sales were profitable — for example, revenue could be inflated through excessive spending on advertising and promotions.
Sadly for Edgewell Personal Care, its EPS declined by 11.3% annually over the last three years, more than its revenue. This tells us the company struggled because its fixed cost base made it difficult to adjust to shrinking demand.
Final Judgment
Edgewell Personal Care doesn’t pass our quality test. With its shares topping the market in recent months, the stock trades at 12.4× forward P/E (or $27.57 per share). This valuation is reasonable, but the company’s shaky fundamentals present too much downside risk. There are superior stocks to buy right now. We’d recommend looking at a top digital advertising platform riding the creator economy.
Stocks We Would Buy Instead of Edgewell Personal Care
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