Another Great Deal For Helen Of Troy

I have followed and written about consumer products company Helen of Troy (Nasdaq:HELE) for a long time, and yet I still find myself surprised at how the company operates. Simply put, this company just has a knack for finding attractive deals and pulling the trigger - common sense would dictate that other would-be rivals would look around and see the same business conditions and compete against these accretive opportunities for Helen of Troy. 

The Latest
Helen of Troy's stock spiked on Thursday on the company's announcement that it would be buying consumer products company Kaz for $260 million - a purchase that the company will fund largely out of debt. A privately-held company, Kaz sells a wide range of products in the personal care and houseware space, including air purifiers, fans, thermometers and humidifiers. Although the company has some of its own brands, a lot of Kaz's sales come from licensed brands like Vicks and Braun [both from Procter & Gamble (NYSE:PG)] and Honeywell (NYSE:HON). That is almost a perfect match for how HELE operates, and the two companies should fit together exceptionally well.

Solid Financial Reasons For The Deal
According to HELE, Kaz is on track to produce about $400 million in sales. That suggests an exceptionally good valuation on the deal, though on a price-sales basis, it is not much different than the valuations on companies like Newell Rubbermaid (NYSE:NWL), Jarden (NYSE:JAH) or Lifetime Brands (Nasdaq:LCUT). What is interesting about that comparison, though, is that all of those companies also have rather low returns on capital. That raises the question of just how well-run Kaz is and if HELE is buying a problem. (For related reading, check out How To Use Price-To-Sales Ratios To Value Stocks.)

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