Are you a consumer or household product that your company has neglected? Have you been orphaned like Annie as your company moves to more attractive opportunities? Take comfort; there is someone out there who loves you and would like to market you back to life.
Prestige Brands (PBH) is a consumer product company specializing in acquiring brands left behind by others. Formed in 1996, Prestige has assembled an amazing array of familiar products — all acquired at discount prices due to their having lost favor for one reason or another within their parent company.
Among the products being manufactured and distributed by Prestige are over the counter drugs, cleaning products and personal care items. Recognizable names include Chloraseptic, Murine, Clear Eyes, Comet, Compound W, Cutex, Demorex and Spic & Span. These, and numerous other products, have been acquired from major home product companies such as Proctor and Gamble. The most recent label acquired was in the over-the-counter pharmaceutical area whose primary products revolve around wart removal.
Prestige company stock has traded in a relatively narrow range during the last year. The 52-week high for the stock is $12.29, and the low for the period is $5.87. The company recently had its credit rating affirmed with a negative outlook.
Company executives are expressing confidence that Prestige can resume its core growth rate in 2009 after experiencing a drop in revenues exclusive of its recent acquisition of the Compound W line of wart removal and related products.
While these consumer products are all highly recognizable names with high levels of customer satisfaction, they are also in many cases discretionary items which are candidates for consumer belt tightening. As a result, many analysts have rated the company’s stock a sell, or at best, a hold.
Prestige does not have a great deal of long-term debt outstanding. Their most actively traded offering carries a 9.25% coupon and most recently traded at 93.65, producing a yield to maturity of 11.536%. Yield to the par call in 2010 at this price would be 14.445%
While these yields are attractive and tempting, it does not appear that the investor is being fairly compensated at these levels for the risk being undertaken. An investor in this sector might want to wait until the price declines further before taking this leap. Should adding this bond to the portfolio be desired by the investor, the percentage allocation to the name should be minor.
This article was written by Jamie Dlugosch, contributor to InvestorPlace.com. For more actionable insight like this, go to: www.InvestorPlace.com. James F. Dlugosch contributed to this article.
