Think back to the early 2010’s and you may just recall this darling stock as it notched over a 1000% return from trough to peak. However, in the last quarter of that decade, we witnessed this stock give back almost every single point. With the stock very close to its covid lows, is there any chance Newell Brands makes another epic run?
The market’s are packed to the brim with bad news as I write this post today. War, bankruptcies, failing economies are all becoming so common the market doesn’t even seem to blink. In fact, I just read a post minutes ago about a potential US and China military conflict. What?! I can’t imagine that’s good for anyone’s investments, outside of maybe the defense arena.
That said, let’s take a look at the fundamentals of this once prized possession. Maybe we can determine if a position is warranted or if Newell brands is yet another fallen star destined for subpar returns.
Investment Analysis
What can we uncover by taking a look at the fundamental investment analysis above?
First, the company isn’t far away from the analyst’s target price. That suggests there isn’t anything they can see in the near term that would drive price much higher. Having said that, most analysts are stating Newell is a buy at this level with an optimistic price of $20 per share. From today’s price of $15.84 that would be approximately 26% of potential upside.
The next item that stands out is the higher than expected debt to free cash flow. This isn’t really the greatest time in US history to be shouldering a debt load against a weak balance sheet. Discount that free cash further to account for dividends and liabilities and Newell Brands is much less attractive.
The final nail in the proverbial coffin is the 5 year EPS growth rate at -6.74%. With a decade of virtually free money and a bull market that just wouldn’t quit I can’t see how this is possible. I would have thought brand power alone could have kept them in the green. Now, I’m not overly familiar with some of their brands but those I am, are everyday household names. Moreover, the likelihood you own or are using many of their products right now is very high. In any case, I just can’t get my head around this one.
Price Chart of Newell Brands
With this company looking particularly weak and an economy to match we’re very likely fine to wait on the sidelines. Nevertheless, for the sake of being thorough, let’s look at it from a more technical perspective. In the chart above we can see Newell Brands has been in a decline over the trailing twelve month period. A 42% decline to be specific. Compare that to the S&P’s 13% decline over the same period and I just can’t see any urgency to initiate a position.
Additionally, the stock is currently overbought and money flow is trending lower which makes now an even less ideal time to put skin in the game. However, should the Federal Reserve somehow manage to stave off a recession I think we could be at an interesting level here. Could this be the start of another 1000% run?
That much isn’t clear. What is clear, is now doesn’t seem like the best time to initiate a position into Newell Brands. Let me know what you think in the comments below. As an alternative, here is a link to Newell Brands investor relations site, maybe they feel differently about the future than what I’m currently seeing.
God bless,
Jeff
*This post is NOT a recommendation to buy, sell, or trade any security. The information provided within is strictly for entertainment. Traders or investors should always consult a registered financial professional prior to trading or investing.
