Over the last six months, Helios’s shares have sunk to $36.34, producing a disappointing 19.1% loss - a stark contrast to the S&P 500’s 3.7% gain. This might have investors contemplating their next move.

Is now the time to buy Helios, or should you be careful about including it in your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.

Why Do We Think Helios Will Underperform?

Even though the stock has become cheaper, we're cautious about Helios. Here are three reasons why you should be careful with HLIO and a stock we'd rather own.

1. Core Business Falling Behind as Demand Declines

In addition to reported revenue, organic revenue is a useful data point for analyzing Gas and Liquid Handling companies. This metric gives visibility into Helios’s core business because it excludes one-time events such as mergers, acquisitions, and divestitures along with foreign currency fluctuations - non-fundamental factors that can manipulate the income statement.

Over the last two years, Helios’s organic revenue averaged 6.6% year-on-year declines. This performance was underwhelming and implies it may need to improve its products, pricing, or go-to-market strategy. It also suggests Helios might have to lean into acquisitions to grow, which isn’t ideal because M&A can be expensive and risky (integrations often disrupt focus).

2. EPS Trending Down

We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.

Sadly for Helios, its EPS declined by 4.5% annually over the last five years while its revenue grew by 8%. This tells us the company became less profitable on a per-share basis as it expanded.

3. New Investments Fail to Bear Fruit as ROIC Declines

ROIC, or return on invested capital, is a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Helios’s ROIC averaged 4.4 percentage point decreases each year. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

Final Judgment

We see the value of companies helping their customers, but in the case of Helios, we’re out. After the recent drawdown, the stock trades at 15.8× forward P/E (or $36.34 per share). This valuation tells us a lot of optimism is priced in - we think other companies feature superior fundamentals at the moment. We’d suggest looking at a fast-growing restaurant franchise with an A+ ranch dressing sauce.

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