HELE Stock: Helen of Troy Fell 80% and Beat Earnings — So Why Did It Drop 10%?

Helen of Troy (HELE) Q1 FY2027 — Helen of Troy — owner of OXO, Hydro Flask, Osprey and Vicks — grew Q1 sales +8% and beat a rock-bottom estimate, but adjusted EPS fell 58% to $0.17 and the stock dropped ~10% to ~$25, down over 80% from its peak. Helen of Troy trades at roughly 7x forward earnings after an 80%+ collapse — a portfolio of genuinely good brands wrapped in ~3.5x leverage, tariff exposure and a botched restructuring. Our DCF lands near $30 vs the ~$25 price, but adjusted earnings are still falling, so this is a deep-value HOLD, not a confident buy. THE CALL: HOLD (3/5, CHEAP BUT UNPROVEN) — base-case value ~$30 vs ~$25 today. KEY METRICS: - Q1 FY27: net sales $402.1M (+8.2%, organic +7.4%); adjusted EPS $0.17 (down 58% YoY) — a beat on a low bar - GAAP EPS $1.51 was inflated ~$1.74 by a one-time facility-sale gain; adjusted operating margin just 4.0% - Adjusted EBITDA ~$25.5M (flat in dollars); gross margin 46.0% (-110 bps on tariffs/mix) - Segments: Home & Outdoor $194.9M (+9.5%, profit up); Beauty & Wellness $207.2M (+7%, profit -48%) - Balance sheet: ~$716M debt vs $22M cash; net leverage ~3.5x EBITDA; paid down $65M in the quarter - FY27 guidance: revenue RAISED to $1.76-1.83B, adjusted EPS HELD at $3.25-3.75 (tariffs eating the upside) - Valuation ~$25, ~7x forward P/E and ~6.5x EV/EBITDA vs 10-14x for a stable peer; pays no dividend - Owner-earnings DCF (base ~$85M FCF, -3%/+3%, 11-13%): ~$30 fair value; bear case (~$24) sits at the price - Bear risks: Project Pegasus restructuring shortfall + shareholder litigation, tariffs, soft discretionary demand, leverage What to watch: the adjusted operating margin (is the decline bottoming?), the net-leverage ratio (progress below 3x), and the tariff / refund picture Also on YouTube: @ChargedAlpha DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.