Are Essity stocks a buy in 2026?

Wondering if Essity shares are worth a look? The Swedish hygiene heavyweight behind TENA and Tork offers defensive earnings, strong cash flow and leading market positions. With an attractive valuation, steady growth prospects and ongoing dividends and buybacks, Essity shapes up as a low-drama stock with solid long-term return potential.

Why you should buy Essity shares

Essity is a great business with defensive characteristics (safe balance sheet, staple products), high cash flow generation and low single digit structural top line growth. Margin (and return on invested capital) currently looks elevated, but attractive valuation (EV/sales) compensates for that risk.

In a base case scenario, there is a reasonably clean path to an 8%-9% per annum return, even with the margin going backwards towards the long-term average. The markets they operate in are relatively concentrated and they are the market leader or #2 player in 90% of cases with stable to growing market share for most.

Essity dominates Europe (about 60% of group sales) and Latin America (about 20% of group sales). Their closest peers for tissue paper are Kimberly Clark (mainly US) and UniCharm (mainly Asia) as well as P&G (for feminine care and nappies).

What Essity does  

Essity is a Swedish multinational company specialising in hygiene and health products headquartered in Stockholm, Sweden.

Essity's range of products includes personal care items, consumer tissue products, professional hygiene solutions, and medical care goods. The company is known for its well-established brands like TENA, Tork, and Libero. They have around 35,000 employees and operate in about 150 countries.

Strategy and outlook  

Essity is deliberately pivoting from margin defense to volume recovery: management is reallocating savings into advertising and promotion and selective price architecture to gain share, explicitly accepting near-term margin volatility while keeping the more than 3% organic growth ambition intact.

The other long-term target of a 15% operating margin also remains. Management is hosting a Capital Markets Day in May where an adjusted strategic framework could be expected, but unlikely to significantly alter the overall operating framework.

Returns 

Focusing on FY25, the company delivered 1% organic revenue growth, 14.1% margin and returned about 9 billion Swedish Krona (SEK) via dividend/buybacks (about 5.5% yield), paid down debt to 1.0x EBITDA (from 3x in 2023), and, after the price drop post results, traded on just 12.8x trailing P/E which is towards the lower end of relative valuation to Household Products Sector.

Capital allocation will likely continue prioritising dividend/buybacks (dividends increase by 6% proposed to 8.75 Swedish Krona and there are likely further buybacks as management admitted valuation is a real constraint on mergers and acquisitions). Free cash flow, assuming no growth, is at around 11.5 billion Swedish Krona, so a very supportive about 6% yield currently.

The SEK has strengthened significantly over the previous year, up 21% y/y. Despite this strength, EPS in SEK has grown in FY25 year-on-year and is highest in company history (partly helped by share count reduction).

Get stories like this in our newsletters.