Newell Brands Inc Valuation – January 2019 $NWL

Company Profile (excerpt from Reuters): Newell Brands Inc., incorporated on February 23, 1987, is a marketer of consumer and commercial products. The Company’s segments include Writing, Home Solutions, Commercial Products, Baby & Parenting, Branded Consumables, Consumer Solutions, Outdoor Solutions and Process Solutions. The Company’s products are marketed under a portfolio of brands, including Paper Mate, Sharpie, Dymo, Expo, Parker, Elmer’s, Coleman, Marmot, Oster, Sunbeam, FoodSaver, Mr. Coffee, Rubbermaid Commercial Products, Graco, Baby Jogger, NUK, Calphalon, Rubbermaid, Contigo, First Alert and Yankee Candle. As of December 31, 2016, the Company sold its products in 200 countries throughout the world and had operated on the ground in 100 of these countries.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of NWL – January 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $9,529,348,480 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.98 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -425.11% Fail
6. Moderate PEmg Ratio PEmg < 20 -7.22 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.60 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.98 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.15 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg -$2.83
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth -$40.99
MG Value based on 0% Growth -$24.03
Market Implied Growth Rate -7.86%
Current Price $20.41
% of Intrinsic Value N/A

Newell Brands Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of earnings stability or growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $1.28 in 2014 to an estimated $-2.83 for 2018. This level of negative earnings does not support a positive valuation.As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Newell Brands Inc revealed the company was trading above its Graham Number of $0. The company pays a dividend of $0.88 per share, for a yield of 4.3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was -7.22, which was below the industry average of 20, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-8.84.

Newell Brands Inc scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$8.84
Graham Number $0.00
PEmg -7.22
Current Ratio 2.98
PB Ratio 1.60
Current Dividend $0.88
Dividend Yield 4.31%
Number of Consecutive Years of Dividend Growth 1

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $12,208,500,000
Total Current Liabilities $4,096,700,000
Long-Term Debt $9,296,800,000
Total Assets $22,398,100,000
Intangible Assets $8,745,000,000
Total Liabilities $16,371,900,000
Shares Outstanding (Diluted Average) 471,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate -$14.52
Dec2017 $5.63
Dec2016 $1.25
Dec2015 $1.29
Dec2014 $1.35
Dec2013 $1.63
Dec2012 $1.37
Dec2011 $0.42
Dec2010 $0.96
Dec2009 $0.97
Dec2008 -$0.18
Dec2007 $1.68
Dec2006 $1.40
Dec2005 $0.91
Dec2004 -$0.42
Dec2003 -$0.17
Dec2002 -$0.76
Dec2001 $0.99
Dec2000 $1.57
Dec1999 $0.34
Dec1998 $1.70

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$2.83
Dec2017 $2.76
Dec2016 $1.34
Dec2015 $1.33
Dec2014 $1.28
Dec2013 $1.19
Dec2012 $0.88
Dec2011 $0.68
Dec2010 $0.86
Dec2009 $0.86
Dec2008 $0.76
Dec2007 $1.05
Dec2006 $0.55
Dec2005 $0.12
Dec2004 -$0.10
Dec2003 $0.17
Dec2002 $0.48

Recommended Reading:

Other ModernGraham posts about the company

5 Low P/E Companies In The S&P 500 – August 2018
Best Stocks Below Their Graham Number – August 2018
10 Low PE Stock Picks for the Defensive Investor – August 2018
10 Undervalued Companies for the Defensive Dividend Stock Investor – July 2018
Best Stocks Below Their Graham Number – June 2018

Other ModernGraham posts about related companies

Sleep Number Corp Valuation – July 2018 $SNBR
National Presto Industries Inc Valuation – June 2018 $NPK
Leggett & Platt Inc Valuation – June 2018 $LEG
Clorox Co Valuation – May 2018 $CLX
Newell Brands Inc Valuation – March 2018 $NWL
La-Z-Boy Inc Valuation – Initial Coverage $LZB
Tupperware Brands Corp Valuation – Initial Coverage $TUP
Leggett & Platt Inc Valuation – March 2017 $LEG
Newell Brands Inc Valuation – February 2017 $NWL
Clorox Company Valuation – January 2017 $CLX

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.


Posted

in

,

by

Comments

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.