Amid an upturn in consumer expenditure and intensified focus on customer experience, the consumer goods industry is poised to grow in 2024. Given this backdrop, fundamentally strong consumer stocks Ennis, Inc. (EBF), Virco Mfg. Corporation (VIRC), and Acme United Corporation (ACU) could be wise portfolio additions now.
The events of the past year have amply demonstrated that consumers display remarkable resilience against challenging economic situations, including soaring inflation, rising interest rates, and heightened recession risks. This resilience bolstered consumer goods businesses encompassing food production, pre-packaged goods, clothing, beverages, automotive, and electronics.
Despite prevalent investor uncertainty surrounding the economy, consumer spending has shown consistent growth. According to the Bureau of Economic Analysis, disposable personal income (DPI) increased by $71.9 billion or 0.4% in November 2023.
Consumer spending similarly maintains an upward trajectory, with a 0.2% rise registered in the same month. This represents a marginal improvement over the 0.1% uptick observed in October 2023, albeit September and August's consumer spending growth rates are 0.7% and 0.4%, respectively.
Furthermore, holiday season expenditure by Americans was noticeably higher despite lingering inflation, with retail sales from November 1 to December 24 demonstrating a 3.1% year-over-year surge, according to Mastercard SpendingPulse data.
Economic indicators also portray a thriving employment landscape. The unemployment rate has remained below 4% for nearly two years, falling to 3.7% in November and underscoring the solidity of the labor market.
Given the combination of increasing disposable income and a robust job market, consumer spending remains poised for further enhancement. Accordingly, the global consumer goods sector is expected to reach $224.33 billion by 2032, growing at a CAGR of 7.8%.
With these favorable trends in mind, let's delve into the fundamentals of the three Consumer Goods stock picks, beginning with the third choice.
Stock #3: Ennis, Inc. (EBF)
EBF manufactures and sells business forms and other business products in the United States. The company offers snap sets, continuous forms, laser cut sheets, tags, labels, envelopes, integrated products, jumbo rolls, and pressure-sensitive products.
On December 13, 2023, EBF’s Board of Directors declared a quarterly dividend of 25 cents per share on the company’s common stock. The dividend is payable to shareholders on February 1.
Its annualized dividend rate of $1 per share translates to a dividend yield of 4.51% on the current share price. Its four-year average yield is 4.88%. EBF’s dividend payments have grown at CAGRs of 3.6% and 2.7% over the past three and five years, respectively.
EBF’s trailing-12-month cash per share of $3.24 is 54.1% higher than the industry average of $2.10. Its trailing-12-month net income and levered FCF margins of 10.50% and 10.72% are 71.6% and 79.2% higher than the industry averages of 6.12% and 5.98%, respectively.
For the fiscal third quarter that ended November 30, 2023, EBF’s revenues and gross profit margin stood at $104.62 million and $30.53 million, respectively. Moreover, its non-GAAP EBITDA stood at $18.27 million.
For the same quarter, its net earnings and earnings per share stood at $9.91 million and $0.38, respectively. For the nine months that ended November 30, 2023, its cash at end of period stood at $83.90 million.
Street expects EBF’s EPS for the fiscal fourth quarter ending February 2024 to increase 23.3% year-over-year to $0.37. Its revenue is expected to be $100.40 million. The company surpassed consensus revenue estimates in three of the trailing four quarters, which is impressive.
The stock has gained 8.8% over the past six months to close the last trading session at $22.18. Over the past nine months, it has gained 5.2%.
EBF’s POWR Ratings reflect its positive prospects. The stock has an overall B rating, equating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
The stock has a B grade for Stability and Quality. Within the Consumer Goods industry, it is ranked #7 out of 53 stocks.
To see additional POWR Ratings for Growth, Value, Momentum, and Sentiment for EBF, click here.
Stock #2: Virco Mfg. Corporation (VIRC)
VIRC designs, produces, and distributes furniture in the United States. It serves public and private educational institutions, charter schools, convention centers and arenas, hospitality providers, government facilities, and places of worship through its sales and support teams and dealer network.
Due to the solid third-quarter results, VIRC’s board of directors has re-instated a quarterly dividend of $0.02 per share, payable to shareholders on January 10, 2024.
In addition, the board authorized an open-market share repurchase program of up to $5 million. In combination with share price appreciation, these actions will re-establish the balanced portfolio of shareholder returns that allows individual shareholders to choose the return that enables individual shareholders to share in the benefits of current income plus capital appreciation.
VIRC’s trailing-12-month asset turnover ratio of 1.76x is 120.4% higher than the industry average of 0.80x. Its trailing-12-month gross profit and net income margins of 42.59% and 10.68% are 40.7% and 74.6% higher than the industry averages of 30.28% and 6.12%, respectively.
For the fiscal third quarter that ended October 31, 2023, VIRC’s net sales and gross profit increased 8.9% and 24.2% year-over-year to $84.25 million and $38.21 million, respectively.
For the same quarter, its net income and net income per common share stood at $10.16 million and $0.62, up 29% and 29.2% from the prior-year quarter, respectively. As of October 31, 2023, VIRC’s total current assets stood at $98.84 million, compared to $89.55 million as of October 31, 2022.
Street expects VIRC’s revenue and EPS for the fiscal year ending January 2024 to increase 15.7% and 32.4% year-over-year to $267.30 million and $1.35, respectively. The company surpassed consensus EPS estimates in each of the trailing four quarters and consensus revenue estimates in three of the trailing four quarters.
The stock has gained 183.9% over the past nine months to close the last trading session at $11.24. Over the past six months, it has gained 169.5%.
VIRC’s solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, translating to Buy in our proprietary rating system.
VIRC has an A grade for Sentiment and a B for Value, Momentum, and Quality. Within the same industry, it is ranked #5.
Beyond what we’ve stated above, we have also rated the stock for Growth and Stability. Get all ratings of VIRC here.
Stock #1: Acme United Corporation (ACU)
ACU supplies first aid and safety, cutting, sharpening, and measuring products to the school, home, office, hardware, sporting goods, and industrial markets in the United States, Canada, Europe, and internationally.
On December 13, 2023, ACU’s Board of Directors declared a cash dividend of 15 cents per share on its outstanding common stock, payable to stockholders on January 26, 2024.
Its annualized dividend rate of $0.60 per share translates to a dividend yield of 1.40% on the current share price. Its four-year average yield is 1.82%. ACU’s dividend payments have grown at CAGRs of 5.3% and 4.9% over the past three and five years, respectively.
ACU’s trailing-12-month asset turnover ratio of 1.17x is 46.3% higher than the industry average of 0.80x, while its trailing-12-month levered FCF margin of 13.40% is 124% higher than the industry average of 5.98%.
For the fiscal third quarter that ended September 30, 2023, ACU’s net sales and gross profit increased 1.3% and 22.5% year-over-year to $50.38 million and $19.50 million, respectively.
For the same quarter, its net income and earnings per share stood at $2.15 million and $0.58, up significantly from the prior-year quarter, respectively. As of September 30, 2023, ACU’s cash and cash equivalents stood at $5.57 million, compared to $4.22 million as of September 30, 2022.
The stock has gained 94.5% over the past year to close the last trading session at $42.59. Over the past nine months, it has gained 85.2%.
ACU’s robust prospects are reflected in its POWR Ratings. The stock has an overall A rating, equating to a Strong Buy in our proprietary rating system.
ACU has an A grade for Growth and a B for Value, Sentiment, and Quality. It is ranked first within the same industry.
Click here for the additional POWR Ratings for ACU (Momentum and Stability).
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
EBF shares were unchanged in premarket trading Wednesday. Year-to-date, EBF has gained 1.23%, versus a -0.56% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.
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