Is Newell Brands (NWL) Too Good to Be True? A Comprehensive Analysis of a Potential Value Trap
Understanding the Intricacies of Newell Brands (NASDAQ:NWL)
Value-focused investors are always on the hunt for stocks that are priced below their intrinsic value. One such stock that merits attention is Newell Brands (NASDAQ:NWL). The stock, currently priced at 10.3, recorded a loss of 1.15% in a day and a 3-month increase of 19.23%. The fair valuation of the stock is $17.81, as indicated by its GF Value.
The GF Value represents the current intrinsic value of a stock derived from our exclusive method. It is calculated based on historical multiples, GuruFocus adjustment factor, and future estimates of the business performance. We believe the GF Value Line is the fair value that the stock should be traded at.
Unraveling the Potential Risks of Newell Brands Inc (NASDAQ:NWL)
Despite its seemingly attractive valuation, certain risk factors associated with Newell Brands should not be ignored. These risks are primarily reflected through its low Altman Z-score of 0.69. These indicators suggest that Newell Brands, despite its apparent undervaluation, might be a potential value trap. This complexity underlines the importance of thorough due diligence in investment decision-making.
Decoding the Altman Z-Score
Before delving into the details, let's understand what the Altman Z-score entails. Invented by New York University Professor Edward I. Altman in 1968, the Z-Score is a financial model that predicts the probability of a company entering bankruptcy within a two-year time frame. A score below 1.8 suggests a high likelihood of financial distress, while a score above 3 indicates a low risk.
Company Snapshot: Newell Brands Inc
Newell Brands Inc is an American global consumer goods company. Its business activities function through five segments namely, Commercial Solutions, Home Appliances, Home Solutions, Learning and Development, Outdoor and Recreation. The learning and Development segment generates most of the revenue for the firm.
Newell Brands's Low Altman Z-Score: A Breakdown of Key Drivers
A dissection of Newell Brands's Altman Z-score reveals Newell Brands's financial health may be weak, suggesting possible financial distress.
Is Newell Brands (NASDAQ:NWL) a Value Trap?
Considering the low Altman Z-score and other risk factors, Newell Brands, despite its apparent undervaluation, might be a potential value trap. It is crucial for investors to conduct thorough due diligence before making an investment decision.
GuruFocus Premium members can find stocks with high Altman Z-Score using the following Screener: Walter Schloss Screen .
This article first appeared on GuruFocus.
