Why Prestige Brands (PBH) Stock Is Up Today

NEW YORK (TheStreet) -- Prestige Brands (PBH) stock is gaining Friday after the company announced it had agreed to acquire Insight Pharmaceuticals

By late afternoon, shares had added 18.1% to $32.26.

The company, which distributes over-the-counter medication and healthcare products, said the acquisition adds a new platform in feminine care and strengthens its portfolio. Prestige Brands intends to purchase Insight, a distributor of feminine care and healthcare products, for $750 million in cash. 

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"The acquisition is expected to boost Prestige's annual revenues to approximately $800 million, bringing us closer to our stated goal of becoming a billion dollar OTC products company," said Prestige CEO Matthew M. Mannelly in a statement.

The transaction is expected to close in the first half of this fiscal year, pursuant to customary closing conditions.

TheStreet Ratings team rates PRESTIGE BRANDS HOLDINGS as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:

"We rate PRESTIGE BRANDS HOLDINGS (PBH) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, expanding profit margins and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The gross profit margin for PRESTIGE BRANDS HOLDINGS is rather high; currently it is at 55.95%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, PBH's net profit margin of 2.14% significantly trails the industry average.
  • PRESTIGE BRANDS HOLDINGS has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, PRESTIGE BRANDS HOLDINGS increased its bottom line by earning $1.28 versus $0.74 in the prior year. This year, the market expects an improvement in earnings ($1.50 versus $1.28).
  • PBH, with its decline in revenue, slightly underperformed the industry average of 0.7%. Since the same quarter one year prior, revenues slightly dropped by 8.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the Pharmaceuticals industry and the overall market, PRESTIGE BRANDS HOLDINGS's return on equity is below that of both the industry average and the S&P 500.

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