Stock Analysis: Kenvue Inc. (NYSE: KVUE)
Kenvue is the parent company behind Tylenol, Neutrogena, Listerine, Aveeno, Band-Aid, and other strong, profitable, and internationally recognized brands. Is it worth the investment?
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Hello, on the money family!
A couple of weeks ago, I shared an analysis of Johnson and Johnson (JNJ) stock, a holding in my investment portfolio for nearly seven years.
That said, within that report, I also talked about a company called Kenvue.
As a reminder, here is an excerpt from the JNJ report:
“Thinking back to March of 2018, my core reason for incorporating shares of JNJ into my investment portfolio was its Consumer Healthcare division.
The division included internationally recognized brands like Aveeno, Band-Aid, Benadryl, Johnson's, Listerine, Mylanta, Neutrogena, and Tylenol.
In September of 2022, JNJ announced that it would "spin-off" the Consumer Healthcare Division into its own stand-alone company with its independent management and even ticker symbol!
Fast forward to May 4th of 2023, Kenvue Inc. (NYSE: KVUE) made its stock market debut, and its detachment from JNJ became a reality.
In other words, my original thesis for purchasing shares of Johnson and Johnson changed. Enough to make me pause and reevaluate.
Toward the end of the report, I shared my thoughts on reallocating my portfolio and mentioned that Kenvue caught my attention as a potential investment.
However, before making any decisions, I wanted to conduct a thorough analysis—and since some of you requested it, I made it a priority.
That analysis is now complete, and the report is ready!
Join me as we take a deep dive into Kenvue to determine whether it fits within my overall portfolio strategy, if it presents a compelling investment opportunity right now, or if my cash is better invested elsewhere.
This report includes:
A commentary about the business moat and competitive advantage
A deep dive into the most recent financial reports available specifically for fiscal years 2023 and 2024 (explained in simple terms)
A dividend red flag that investors should be aware of (this shocked me)
A closer look at how the stock has performed since the IPO
A closer look at valuation— is the stock overpriced or aligned with expectations?
And more!
Grab your beverage of choice, and let's get started.
***Note: This report includes important images. If you cannot see them, check your browser settings.
Let’s start here: What makes this company different?
Kenvue's Competitive Advantage (Moat):
When analyzing individual stocks, one vital question to ask yourself is what differentiates the business from other competitors in the same industry. Why would a consumer choose Kenvue's products over a cheaper version from a store brand or other companies in the same industry, for instance?
For this particular business, it boils down to a couple of core things:
Brand power: Familiarity, trust, and consumer loyalty are some of the most important pillars that make a business successful. Because of all the household names in consumer health, consumers are often willing to pay a premium for its products over generic alternatives. Brand trust also leads to repeat purchases, which is good for profitability and longevity.
*The image above shows just a short list of the most popular names. The business has over 20 internationally recognized brands.
Global reach: Kenvue's products are sold in over 165 countries and are widely available in pharmacies, supermarkets, and online retailers. This global footprint provides significant scale advantages over smaller competitors.
Deep Dive into The Financials:
As mentioned earlier, Kenvue became a publicly traded company less than two years ago (May 2023). Although the brands in this business have been around for decades, limited financial data is available for the newly independent, stand-alone company.
For the purpose of this report, we will examine the most recent annual report available, which provides us with data regarding performance for fiscal years 2023 and 2024.
I reviewed those documents (so you don't have to), and here are some of my most important findings: