Should you invest in Fortune Brands as RBC predicts a 19% upside potential?

By: Motiur Rahman
Motiur Rahman
Md Motiur enjoys researching how companies are solving challenges the world will face over the coming decades. In his… read more.
on Oct 18, 2021
  • Fortune Brands shares on Monday gained 1.74% after RBC Capital Markets upgraded to outperform.
  • The first also raised its FBHS price target to $114 from $109, implying an upside potential of about 19%.
  • Analyst Mike Dahl said the current sell-off may be overblown.

On Monday, Fortune Brands Home & Security Inc. (NYSE:FBHS) shares gained 1.74% after RBC Capital Markets upgraded to outperform from sector-perform. Analyst Mike Dahl said the market may be overstating the potential impact of the current supply chain difficulties and cost pressures. 

The analyst noted the substantial declines caused by the market risk have created an exciting entry point to buy a quality stock trading at reasonable valuation multiples in its space.

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FBHS shares are down 13.5% since peaking on 7th May. As a result, the stock is up 13.69% this year, thus underperforming the S&P 500 index, which is up more than 21% year-to-date.

Is Fortune Brands stock a good buy?

From an investment perspective, Fortune Brands shares trade at trailing 12-month and forward P/E ratios of 18.74 and 15.13, respectively, making the stock attractive to value investors.

Moreover, the company’s earnings per share could rise by more than 29% this year as per the consensus Street forecast. Therefore, it could also gain the attention of growth investors.

Source – TradingView

Is a channel breakout imminent?

Technically, the FBHS stock price seems to be oscillating within a descending channel formation in the intraday chart. However, shares recently bounced off just above the trendline support to surge towards the 100-day moving average.

Therefore, with the stock yet to reach overbought conditions, it could extend gains, triggering a channel breakout. As such, investors could target profits at about $100.45, or higher at $103.85. 

On the other hand, if the stock fails to break out, thereby pulling back towards the lower trendline, it could find support at about $93.16, or lower at $89.46.

FBHS still looks like a buy

In summary, although Fortune Brands shares are up 7.5% this month, the stock is yet to reach overbought conditions, thereby leaving room for more upward movement. 

Therefore, given its attractive valuation multiples and growth prospects, it may not be too late to buy Fortune Brands shares.

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