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Primo Water Corp PRMW

Morningstar Rating
$14.35 −0.20 (1.37%)
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Company Report

Primo Water Earnings: International Unit Sale Sharpens Focus on U.S. and Improves Efficiencies 

No-moat Primo Water’s share price popped 10% today after the firm announced a planned sale of the bulk of its struggling international operations for $575 million in cash (scheduled to close by the end of 2023), with plans to dispose the remainder in 2024. We view this as a prudent move allowing management to sharpen its focus on the healthy North America business, reduce leverage (to its stated long-term target of 2.5 times net debt to EBITDA), diversify into water adjacencies via acquisitions, and return cash to shareholders through buybacks. Revenue will likely fall in the near term as a result, but we expect the impact will be mitigated on the bottom line by cost savings from a smaller operational footprint.

Price vs Fair Value

PRMW is trading at a 9% discount.
Price
$14.35
Fair Value
$34.70
Uncertainty
Medium
1-Star Price
$77.50
5-Star Price
$15.65
Economic Moat
Shsm
Capital Allocation
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Bulls Say, Bears Say

Bulls

As a pure-play large-format water solutions provider, Primo Water should benefit as residential and business clients seek better-quality water amid rising wellness awareness and concerns about municipal water.

Bears

Primo Water competes in the commoditized water market where a lack of differentiation results in low entry barriers and intense competition.

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News

Trading Information

Previous Close Price
$14.55
Day Range
$14.3414.70
52-Week Range
$12.2716.47
Bid/Ask
$14.05 / $14.65
Market Cap
$2.29 Bil
Volume/Avg
744,896 / 984,774

Key Statistics

Price/Earnings (Normalized)
16.87
Price/Sales
1.01
Dividend Yield
2.20%
Dividend Yield (Forward)
2.20%
Total Yield
3.58%

Company Profile

Primo Water is a pure-play water provider with a variety of products and services, including water delivery, exchange, refill/filtration, and water dispensers in 21 countries, mostly in North America and Europe. The firm usually initiates the customer relationship with the sale of water dispensers, and then generates recurring revenue via the water direct and exchange services (two thirds of total sales) by delivering large-format (typically three gallons or greater) water bottles to residential and commercial customers for use atop or inside the dispensers. Primo generates 75% of revenue and all its profits in North America, while its European operation has yet to turn a profit.
Sector
Consumer Defensive
Industry
Beverages - Non-Alcoholic
Stock Style Box
Small Core
Total Number of Employees
9,240

Competitors

Valuation

Metric
PRMW
KO
NSRGY
Price/Earnings (Normalized)
16.8721.9721.66
Price/Book Value
1.779.567.53
Price/Sales
1.015.622.99
Price/Cash Flow
6.6720.9118.02
Price/Earnings
PRMW
KO
NSRGY

Financial Strength

Metric
PRMW
KO
NSRGY
Quick Ratio
0.600.780.41
Current Ratio
0.841.140.83
Interest Coverage
3.079.598.23
Quick Ratio
PRMW
KO
NSRGY

Profitability

Metric
PRMW
KO
NSRGY
Return on Assets (Normalized)
3.61%11.98%9.56%
Return on Equity (Normalized)
10.32%46.07%31.55%
Return on Invested Capital (Normalized)
6.31%17.88%14.23%
Return on Assets
PRMW
KO
NSRGY

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KDP
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CCEP
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COCSF
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KOF
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CELH
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