Despite several macroeconomic headwinds, consumer spending appears to be resilient. Furthermore, with improved consumer sentiment, numerous technological advancements, and rapid e-commerce expansion, the consumer goods industry is poised to experience robust growth.
In light of this, it could be wise to invest in quality consumer goods stocks Shiseido Company, Limited (SSDOY), Yue Yuen Industrial (Holdings) Limited (YUEIY), and Acme United Corporation (ACU) now. Let’s understand this in detail.
This year, there has been a steady decline in inflation. June’s Consumer Price Index (CPI) increased by 3% from a year ago, which is the lowest increase since March 2021. On a monthly basis, the index rose 0.2%.
In addition, consumer expenditures are holding up steadily. The Bureau of Economic Analysis reported a modest 0.1% increase in consumer spending in May. The core PCE price index rose 0.3% month-on-month while personal income increased 0.4% monthly.
In addition, consumer sentiment saw a notable upturn by the end of June, while short-term inflation expectations remained at their lowest level in over two years. The final June reading of the University of Michigan’s consumer sentiment index rose to 64.4, rebounding from a May slump.
That said, the consumer goods industry prospects are further bolstered by the surge in e-commerce, which offers convenience, expanded choices, and competitive pricing. Consumer businesses are seeing increasing sales and the opening of new market prospects because of their ability to facilitate direct sales, personalized marketing, and global reach.
Furthermore, the integration of digital technology drives the industry’s growth by fostering product innovation, optimizing production processes, and enabling personalized experiences.
From AI virtual assistants to smart devices, these technological advancements empower consumer goods businesses to meet evolving demands, enhance efficiency, and deliver improved products and services.
According to a report by Allied Market Research, the global Fast-Moving Consumer Goods (FMCG) industry is expected to grow at a CAGR of 5.1% and reach $18.94 trillion by 2031.
Given the backdrop, fundamentally sound consumer goods stocks SSDOY, YUEIY, and ACU could be ideal additions to your portfolio now.
Let’s discuss in detail what makes these stocks worthwhile investments.
Shiseido Company, Limited (SSDOY)
Headquartered in Tokyo, Japan, SSDOY produces and sells cosmetics, including fragrances, skincare, and makeup products. It also operates in the restaurant, food, retail, and beauty salon industries. In addition, the company offers childcare facilities and supports a professional hair makeup training school.
On June 6, SSDOY revealed the development of an innovative technique that enhances the dermis’ environment prone to age spots. The technique combines high-frequency electrical stimulation with plant extract. With this advancement, SSDOY intends to improve skincare solutions and address age-related skin concerns effectively.
On May 15, SSDOY reported successfully replicating the “thinning” phenomenon associated with aging in a three-dimensional (3D) skin model. The breakthrough has been made possible by utilizing expertise in cell experiments gained from regenerative medicine research.
Such advancements hold significant potential for further understanding and addressing age-related dermal thinning, which could benefit the company’s growth and expansion prospects.
In terms of forward non-GAAP P/E, SSDOY is trading at 18.12x, 9.7% lower than the industry average of 20.07x. Likewise, the stock’s forward EV/EBITDA multiple of 13.09 compares to the industry average of 13.14.
For the first quarter that ended March 31, 2023, SSDOY’s net sales increased 2.6% year-over-year to ¥240.01 billion ($1.71 billion). Its operating profit rose 140.5% from the prior-year value to ¥10.53 billion ($74.86 million). Moreover, the company’s profit increased 61.7% year-over-year to ¥9.19 billion ($65.38 million), while its EPS came in at ¥21.71, up 97.4% year-over-year.
The consensus revenue estimate of $7.15 billion for the fiscal year ending December 2023 reflects a 207.2% year-over-year improvement. Likewise, the consensus EPS estimate of $0.81 for the current year indicates a 39.4% rise year-over-year. Also, the company surpassed its consensus revenue estimate in three of four trailing quarters.
Over the past year, the stock has gained 12.5% to close the last trading session at $45.52.
SSDOY’s solid fundamentals are apparent in its POWR Ratings. The stock has an overall rating of B, equating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
SSDOY has a B grade for Growth, Sentiment, and Quality. It is ranked #4 in the 54-stock Consumer Goods industry.
In addition to the POWR Ratings I’ve just highlighted, you can see SSDOY’s ratings for Value, Stability, and Momentum here.
Yue Yuen Industrial (Holdings) Limited (YUEIY)
Based in Kwun Tong, Hong Kong, YUEIY manufactures and sells athletic shoes, outdoor shoes, casual shoes, sports sandals, soles, and other footwear products. It also engages in retail and distribution of sportswear and footwear products while providing commercial spaces to retailers and distributors.
YUEIY’s forward EV/Sales of 0.38x is 68.2% lower than the industry average of 1.19x. Its forward EV/EBITDA of 4.22x is 56.4% lower than the 9.67x industry average. Moreover, the stock’s forward Price/Sales of 0.25x is 71.6% lower than the industry average of 0.88x.
During the first quarter ended March 31, 2023, YUEIY’s revenue came in at $2.11 billion, and its gross profit stood at $497.62 million. The company’s other comprehensive income grew significantly from the prior year’s quarter to $8.49 million. Also, its profit for the period attributable to non-controlling interests came in at $15.05 million, up 76.2% year-over-year.
YUEIY’s revenue is expected to grow 10.3% year-over-year to $9.74 billion for the fiscal year ending December 2024. Moreover, the company surpassed its consensus revenue estimates in three of the trailing four quarters. The stock has gained 7.6% over the past month to close the last trading session at $6.93.
YUEIY’s positive outlook is reflected in its POWR Ratings. The stock has an overall rating of B, translating to Buy in our proprietary rating system.
YUEIY has an A grade for Growth and Value and a B for Stability. It has ranked #6 out of 54 stocks within the Consumer Goods industry.
Beyond what we stated above, we also have YUEIY’s ratings for Quality, Momentum, and Sentiment. Get all YUEIY ratings here.
Acme United Corporation (ACU)
ACU supplies first aid, medical products, and cutting technology to schools, homes, offices, and various markets across the United States, Canada, and Europe. The company serves the mass market and e-commerce retailers; industrial distributors; and office supplies, sporting goods, and hardware stores.
In terms of trailing-12-month EV/Sales, ACU is trading at 0.73x, 58.4% lower than the industry average of 1.76x. Its trailing-12-month Price/sales of 0.47x is 66.5% lower than the 1.41x industry average. Furthermore, the stock’s trailing-12-month Price/Book of 1.16x is 56.6% lower than the industry average of 2.67x.
For the fiscal first quarter that ended March 31, 2023, ACU’s net sales increased 5.8% year-over-year to $45.84 million. Its gross profit grew 8.8% from the year-ago value to $16.28 million.
The company’s income from operations was $2.19 million, an increase of 59.6% year-over-year. In addition, its net income and EPS were $990 thousand and $0.28, up 19.3% and 27.3% year-over-year, respectively.
Analysts expect ACU’s revenue to increase 4.1% year-over-year to $201.86 million for the fiscal year 2023. The company’s EPS for the current year is expected to grow 107.3% from the prior year to $1.7. Furthermore, its EPS is expected to grow 10% per annum over the next five years.
Shares of ACU have gained 16.6% over the past six months to close the last trading session at $26.20.
ACU’s robust outlook is apparent in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system.
ACU has a B grade for Value, Stability, and Sentiment. It has ranked #5 out of 54 stocks within the same industry.
Click here to access additional ACU ratings for Momentum, Growth, and Quality.
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SSDOY shares were trading at $45.92 per share on Wednesday afternoon, up $0.40 (+0.88%). Year-to-date, SSDOY has declined -5.90%, versus a 17.67% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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