Kenvue Tylenol Turmoil: Does the 33% Drop Scream Undervalued?While many stocks (especially tech) are near all-time highs and have high PE ratios, I'm still hunting for bargains, and Kenvue seems to be relatively cheap. More recently, it came under fire because of Trump's remarks on Tylenol, and the stock lost over 10% in a few days.
Since May 2025, the stock has lost 33%, putting it, in my opinion, in an undervalued zone.
Kenvue is the manufacturer of a bunch of health-related products, including Tylenol, Neutrogena, Band-Aid, Listerine, Benadryl, Zyrtec, Motrin, Aveeno, Johnson's, Rogaine, and many more.
I like this kind of health-related beaten-down stocks because they exhibit good uncorrelation with the rest of the stock market, and in bear markets, they tend to hold up well because people always need to buy healthcare products.
WHY BUY KENVUE STOCK?
The stock has a strong moat, with excellent market penetration, top-of-mind brand recognition, and consumer loyalty, as well as economies of scale, worldwide.
They have great management, with Kirk Perry and Andy Dasgupta leading the company. This guy has a great track record in the consumer product sector.
Despite the decent performance, the stock price is now at an all-time low.
KEY NUMBERS AND FUNDAMENTALS
Where should I start... Since they spun off from Johnson & Johnson, the stock is now the cheapest when compared to their revenue, income, and other metrics.
Diluted EPS is now at $0.22. The same level as in 2023, when the stock was at $24. The difference is that the stock is now at $16 (33% cheaper).
The dividend ratio is now at 5%, the best level ever. The last time it was this close to the current level was in mid-2024, when the dividend yield reached 4.6%. After that, the stock rose by 38% in less than 6 months. If you like dividends, you should definitly take a look at Kenvue.
The PE ratio is 22, which is low compared to the sector and the company's historical data.
Similar story for the PB ratio, which is now at an all-time low.
This data is telling us that the stock is comparatively cheap. Of course, one needs to ask: Is it cheap because of poor prospects for the company, or because the market is overly fearful? I'd lean for the second.
It's also worth adding that their gross margin is 58%, the EBITDA margin is 24% (quite good), and the forward PE is at around 15.
Finally, the analyst's price targets average $22, giving it an upside of around 34%.
MY GAMEPLAN
I'm going to allocate close to 1% of my net worth to this stock. In case the price drops, I will average down my purchasing price, considering that this company is likely to continue having a very strong moat for the coming years.
I plan to hold it for the medium/long term, potentially selling part or the entirety of my holdings once I get over 30% return. I will re-evaluate it later this year.
Quick note: I'm just sharing my journey - not financial advice! 😊
