Why is nobody talking about this gem of a FTSE 250 stock?

Some stocks remain in the spotlight year after year. Two good examples are Lloyds Banking Group and Rolls-Royce. It is an investor favorite, especially in the retail space. Other stocks, such as those outside the FTSE 100, have received less attention. There is one FTSE 250 a stock that has caught my eye recently, although it seems that some others have noticed.

Destroy the beans

The company I am interested in is PZ Cussons (LSE: PZC). The business owns and operates several brands in the beauty, hygiene and baby spaces. Some names are included Carex, St. Tropez and Zip.

Although most of us are familiar with certain brands, their parent companies sometimes don’t get the same media coverage. I think this was true with PZ Cussons over the past few years.

The share price has not been the best performer when I compared it against the whole FTSE 250. But it has gained 10% over the past year. When I compare it to the consumer staples sector, this is actually a very strong performance.

In the same place there are global competitors like Procter & Gamble (-4%) and Johnson & Johnson (+4%). Historical graph of stock price history in Euro over the past year. From this I can see that PZ Cussons has actually done very well.

However, the fact that I appreciate this now that looking back will not make me profit! The important thing is that there is still an opportunity to move forward.

Prospects for 2023

In October, the full results of 2022 are released. Revenue was generally flat, but profit before tax was down 8.7% compared to the previous year.

A big factor in this is the higher cost of goods sold. The impact of inflation and logistics costs hindered PZ Cussons here. However, the business is looking at some cost inflation, as well as increasing some purchase caps.

Since most of the items we sell are consumer staples, I think businesses can pass on higher costs this year to consumers. These products are generally low-priced items, with small price increases unlikely to drive consumers elsewhere.

It is clear from the desired revenue figures. Even in the last three years, revenue has only fluctuated from £587m to £603m, despite the global pandemic! Therefore, I think the coming year will see strong demand and higher profits due to lower costs.

A FTSE 250 outperformer

Last year, PZ Cussons outperformed the sector. This year, I think it can outperform the average of the FTSE 250. One point I should mention is the price-to-earnings ratio of 17.35. Although this is not very high, it should not be considered as an undervalued stock. This may mean that it will not jump significantly in the coming months as the price is already quite high.

Ultimately, this does not mean that I cannot make money from this stock in the long run. On that basis, I’m thinking of adding the stock to my portfolio.