Is Now An Opportune Moment To Examine Newell Brands Inc. (NASDAQ:NWL)?
Newell Brands Inc. (NASDAQ:NWL), is not the largest company out there, but it saw significant share price movement during recent months on the NASDAQGS, rising to highs of US$16.47 and falling to the lows of US$11.82. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Newell Brands' current trading price of US$12.20 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Newell Brands’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
See our latest analysis for Newell Brands
Is Newell Brands Still Cheap?
Newell Brands appears to be expensive according to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Newell Brands’s ratio of 25.61x is above its peer average of 7.35x, which suggests the stock is trading at a higher price compared to the Consumer Durables industry. Another thing to keep in mind is that Newell Brands’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards the levels of its industry peers over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard for it to fall back down into an attractive buying range again.
What kind of growth will Newell Brands generate?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. With profit expected to more than double over the next couple of years, the future seems bright for Newell Brands. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What This Means For You
Are you a shareholder? It seems like the market has well and truly priced in NWL’s positive outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe NWL should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on NWL for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for NWL, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
So while earnings quality is important, it's equally important to consider the risks facing Newell Brands at this point in time. For example, we've found that Newell Brands has 5 warning signs (2 are significant!) that deserve your attention before going any further with your analysis.
If you are no longer interested in Newell Brands, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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