Trade Ideas: Prestige Brands Holdings (PBH)

Prestige Brands Holdings, Inc. (PBH) gapped open higher Tuesday morning and continued to gain ground in midday trading after the company said it acquired privately-held marketer and distributor of OTC healthcare brands, Care Pharmaceuticals Pty Ltd., effective July 1.

PBH reacted positively to the news, spiking nearly a point and touching a high of $31.04 just after the opening bell. The ticker added to those early gains during the trading session and as of 1:00pm PT was up $3.31 or 10.91%, after registering a $31.04 – $34.49 intraday trading range.

From a technical perspective, Prestige Brands stock has an interesting and healthy chart pattern. It had a stair-stepping uptrend during most of FY 2012, going from the $10 level all the way up to $21.60 per share. After pulling back to consolidate for about a two-week period in January 2013, the ticker started to uptrend again, making higher-highs and higher-lows in a stair-step fashion. That was followed by a 52-week high of $35.21 set on May 16.

As PBH continues its attempts of making HH from the current range, momentum traders could take the name that currently trades at forward P/E of about 19 and a PEG ratio of 2.08, to re-test its next major overhead resistance located at the $32.50 level. The overall structure of the equity — keep in mind, PBH’s earnings are expected to increase over 11% in FY 2014 and at an average of 10% annually for the next five years — indicates that if it gets through that level, it has room for another leg higher.

While some volatility is to be expected, we think PBH’s next move up would be toward the $36–$37 range on a short-term basis. Beyond that, look for a target of $38.

PBH rose to $33.65 a share at the close in New York.

Disclosure: No position

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