Newell Brands Inc. (NYSE: NWL), a household name in the Consumer Defensive sector, is capturing investor attention with a potential upside of 39.64%, according to recent analyst ratings. Known for an extensive portfolio of brands like Rubbermaid, Coleman, and Sharpie, Newell Brands operates across various consumer segments, including Home and Commercial Solutions, Learning and Development, and Outdoor and Recreation.
Currently trading at $5 per share, Newell’s stock price sits at the lower end of its 52-week range of $4.48 to $11.63. The stock’s recent performance is reflected in its technical indicators, with a 50-day moving average of $5.75 and a 200-day moving average of $7.82. This suggests a potential undervaluation, presenting a compelling opportunity for investors looking for a turnaround story.
Valuation metrics provide mixed signals. The forward P/E ratio is at a relatively low 6.40, suggesting that the market may be undervaluing Newell’s future earnings potential. However, the absence of a trailing P/E ratio and other valuation metrics like PEG and Price/Book indicates challenges in profitability and earnings predictability.
Newell’s financial health is under pressure, as evidenced by a revenue decline of 5.30% and a negative EPS of -$0.59. The company’s return on equity stands at -8.46%, reflecting inefficiencies in generating profits from shareholders’ investments. Despite these challenges, Newell maintains a robust free cash flow of $254.5 million, offering a cushion to navigate its strategic initiatives and market dynamics.
Dividend investors might be intrigued by Newell’s dividend yield of 5.60%. Nonetheless, the sustainability of this dividend is questionable, given the exceptionally high payout ratio of 195.74%, which suggests that the company is paying out more in dividends than it earns in net income.
Analyst sentiment towards Newell Brands is relatively cautious, with three buy ratings, nine hold ratings, and no sell ratings. The target price range of $5.00 to $11.00, with an average target of $6.98, reflects a mixed outlook but also highlights potential gains for those willing to bet on the company’s recovery.
From a technical perspective, Newell’s Relative Strength Index (RSI) of 36.51 indicates that the stock is approaching oversold territory, providing further evidence that it might be undervalued. The Moving Average Convergence Divergence (MACD) is at -0.20, with a signal line of -0.29, suggesting bearish momentum but also a potential bottoming out.
In the context of its diverse brand portfolio, Newell Brands is strategically positioned to leverage consumer demand across multiple channels, from traditional retail to e-commerce. The company’s long-standing history, dating back to 1903, and its extensive distribution network serve as competitive advantages that could facilitate a turnaround.
For investors, Newell Brands presents a high-risk, high-reward scenario. While the potential upside is considerable, reflecting a significant undervaluation by the market, the company’s financial challenges and dividend sustainability issues pose risks that require careful consideration. Investors should weigh these factors against their risk tolerance and investment strategy when considering Newell Brands as a potential addition to their portfolio.
