The Fair Warning Report - 12/22/2017

Energizer Holdings, Inc.
In the end it was an unremarkable year by an unremarkable company. Year over year earnings and free cash flow were both up for the year, debt increased slightly and tangible book value, while still in negative territory was improved. Had an investor purchased $10K of company stock at the close on 09/30/12 and sold at the close on 09/30/17, a five year hold, their investment return would have been a loss of 37%. Do you feel energized now my friend?

Energizer Holdings, Inc. (NYSE: ENR) - FYE 09/2017 - FAIRLY VALUED - The stock is currently trading in line with my $54 fair value estimate - Please See Linked Worksheet

Edgewell Personal Care Company, Inc.
So the company shows earnings growth of 58% and has fair value price of $105, with a 16% reduction in debt, and free cash flow growth of 42%. Sounds impressive. But the reason for such wonderful growth and fair value numbers has nothing to do with earnings, but with negative income tax on earnings. When the numbers are adjusted to remove the income tax advantage, earnings growth was actually 4%, free cash flow growth was actually 3.5%, debt reduction stayed the same, but fair value became $61 which is why I have rated the stock as fairly valued. In the end, the company may make a lot of consumable products, but they pay no dividend, so I really don't pay them any attention.

Edgewell Personal Care Company, Inc. (NYSE: EPC) - FYE 09/2017 - FAIRLY VALUED - The stock is currently trading in line with my $61 fair value estimate - Please See Linked Worksheet

Powell Industries, Inc.
It has been a tough few years for companies that cater to the oil and gas and mining industries. I would think management would have at least tried to move into other markets. But if the management is happy operating at break even or less, then I am happy to pass on owning shares and hope the employees will do the same.

Powell Industries, Inc. (Nasdaq: POWL) - FYE 09/2017 - OVER VALUED - The stock is currently trading above my ($9) fair value estimate - Please See Linked Worksheet

Emerson Electric Company
There are just some things that catch your eye and in the case of Emerson it was the $4.1billion spent on Business Acquisitions over the past five years. What caught my eye was that in return for spending $4.1billion, Sales over the same period decreased by 38% and Earnings Per Share fell by 46%. To add insult to injury, the company ended FY 2017 with $5.3billion of Goodwill on its books, meaning the company has been overpaying for its acquisitions, acquisitions that have lead to a decline in sales growth and a decline earnings growth. Maybe what needs to be sold here is management. Considering the company's financial performance, I'm fairly certain nobody would overpay for them.

Emerson Electric Company (NYSE: EMR) - FYE 09/2017 - FAIRLY VALUED - The stock is currently trading in line with my $41 fair value estimate - Please See Linked Worksheet