Is Ansell Limited a bargain buy?

Credit: Brogan & Partners

Despite having a dreadful start to the year the shares of leading health and safety protection solutions provider Ansell Limited (ASX: ANN) have managed to outperform the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO).

Which is all the more impressive when you consider that at one stage Ansell’s shares were down by an incredible 30%. Since then they have recovered and are now up by just over 1% year to date.

That sharp decline was the result of the company issuing a full year profit downgrade following the release of its interim results at the start of February. Management pointed to a general weakening in the external economic environment and currency volatility as being the reason for the downgrade.

Since then though there has been a notable improvement in the company’s performance. This led to its full year results being far better than expected. Sales and earnings before interest and tax did fall, but only by 4% year on year in the end.

Even more positive though is that its focus on its growth brands and new product launches has led management to forecast a return to low-to-mid-single-digit organic growth in the near term.

The market appears to agree with this and analysts have forecast for earnings to grow at an average of 5.3% per annum through to FY 2018 according to CommSec.

A further positive could come from the sale of its Sexual Wellness business. Last month the company advised that the segment’s review process is progressing well and management is looking into how the business can be carved out from other parts of the company.

I believe the sale of the segment would complement Ansell’s strategy of offloading non-core assets to strengthen its core businesses through value-enhancing acquisitions.

Although things are looking a lot more positive for the company, at around 16x full year earnings I don’t believe you can class Ansell as being a bargain buy anymore. Instead I would class it as being about fair value and a hold.

BWX Ltd (ASX: BWX) on the other hand is a personal care company which could be a bargain buy. Following a 19% decline in its share price in the last month, I think investors should take a close look at this one.

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Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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