Energizer’s 15.2% return over the past six months has outpaced the S&P 500 by 10%, and its stock price has climbed to $34.95 per share. This run-up might have investors contemplating their next move.
Is now the time to buy Energizer, or should you be careful about including it in your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.
Despite the momentum, we're sitting this one out for now. Here are three reasons why there are better opportunities than ENR and a stock we'd rather own.
Why Is Energizer Not Exciting?
Masterminds behind the viral Energizer Bunny mascot, Energizer (NYSE:ENR) is one of the world's largest manufacturers of batteries.
1. Core Business Falling Behind as Demand Declines
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.
Energizer’s demand has been falling over the last eight quarters, and on average, its organic sales have declined by 1.5% year on year. 
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 1.6%. Although this projection suggests its newer products will catalyze better top-line performance, it is still below the sector average.
3. EPS Trending Down
Analyzing the 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 Energizer, its EPS and revenue declined by 1.7% and 1.5% annually over the last three years. We tend to steer our readers away from companies with falling revenue and EPS, where diminishing earnings could imply changing secular trends and preferences. If the tide turns unexpectedly, Energizer’s low margin of safety could leave its stock price susceptible to large downswings.
Final Judgment
Energizer isn’t a terrible business, but it isn’t one of our picks. With its shares topping the market in recent months, the stock trades at 9.9× forward price-to-earnings (or $34.95 per share). While this valuation is optically cheap, the potential downside is big given its shaky fundamentals. We're fairly confident there are better stocks to buy right now. We’d suggest looking at ServiceNow, one of our all-time favorite software stocks with a durable competitive moat.
Stocks We Like More Than Energizer
With rates dropping, inflation stabilizing, and the elections in the rearview mirror, all signs point to the start of a new bull run - and we’re laser-focused on finding the best stocks for this upcoming cycle.
Put yourself in the driver’s seat by checking out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.
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