A surprise ASX share that's doubled since March

The share price of ASX health and beauty consumer products company McPherson's Limited (ASX:MCP) has more than doubled in price over the last few months, putting it more than 22% up for the year. Here are the reasons behind its surprising success.

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A surprising ASX share success story over the last few months has been Australian consumer products company McPherson's Ltd (ASX: MCP). Since plummeting to a low of $1.44 in March, shares in the health, wellness and beauty specialist have more than doubled in price and are now trading back up at $3.01. This means that, despite all the market upheaval caused by the coronavirus pandemic this year, McPherson's shares have gained over 22% year to date.

What is McPherson's?

Originally founded in 1860, McPherson's is now a leading Australasian health and beauty company. It owns six core brands consisting of Dr. LeWinn's, A'kin, Swisspers, Manicare, Lady Jayne and Multix. The company sells its products across Australia and throughout parts of Asia, including China.

McPherson's has been quick to respond to the unique consumer demands created by the COVID-19 pandemic. It invested heavily in the research and development of sanitation and immunity and, in April, launched a new hand sanitiser in partnership with Chemist Warehouse licensed brand 'Ozguard'.

The company also invested in expanding its online stores after noting a big uptick in sales through these channels in the wake of lockdown restrictions.

In a trading update released to the market back in April, McPherson's stated that it was still on track to meet its FY20 underlying profit guidance of 10% annual growth. Its supply chains into China had not been severely disrupted, and the company was benefitting locally from consumers' increased focus on personal hygiene. Its Multix line of household products including freezer bags and baking aids was also seeing an uptick in sales as people spent more time cooking at home.

And while McPherson's did note that significant uncertainty still existed in the market, it emphasised that it had a strong enough balance sheet to meet any short-term challenges. Net debt was low at $14.7 million, and the company was in the final stages of negotiating an additional 3-year $47.5 million debt facility.

Should you invest in this ASX share?

This company's messaging has clearly resonated with investors. By boosting its online presence and directing its R&D investment towards personal hygiene and sanitation products, McPherson's has shown it can quickly pivot to capitalise on growth opportunities in a crisis.

McPherson's focus on its digital sales channels may help it to follow in the footsteps of other ASX companies who have (so far, at least) successfully negotiated the COVID-19 crisis. Online homewares and furniture company Temple & Webster Group Ltd (ASX: TPW) has seen its shares price skyrocket almost 190% higher so far this year. Meanwhile shares in e-commerce market darling Kogan.com Ltd (ASX: KGN) have also more than doubled in price year to date. These companies both sell direct to their consumers, have a strong digital presence and low fixed costs. In the current climate, they are quickly surging ahead of many of their traditional brick-and-mortar retail counterparts. 

It's worth keeping in mind that McPherson's is now trading within eyeshot of its 52-week high. This means it could be creeping into overvalued territory, especially as the country prepares for a potentially bruising recession. However, the COVID-19 pandemic could bring about a radical – and potentially permanent – step-change in the consumer retail industry. This makes it the perfect time for McPherson's to continue expanding its online presence to increase its future growth prospects.

Rhys Brock owns shares of Kogan.com ltd and Temple & Webster Group Ltd. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd and Temple & Webster Group Ltd. The Motley Fool Australia has recommended Kogan.com ltd and Temple & Webster Group Ltd. 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 Scott Phillips.

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