Unraveling the Future of Newell Brands Inc: A Deep Dive into the GF Score
Long-established in the Consumer Packaged Goods industry, Newell Brands Inc (NASDAQ:NWL) has enjoyed a stellar reputation. However, it has recently witnessed a decline of 1.99%, juxtaposed with a three-month change of 20.07%. Fresh insights from the GuruFocus Score Rating hint at potential headwinds. Notably, its diminished rankings in financial strength, growth, and valuation suggest that the company might not live up to its historical performance. Join us as we dive deep into these pivotal metrics to unravel the evolving narrative of Newell Brands Inc.
Decoding the GF Score
The GF Score is a stock performance ranking system developed by GuruFocus using five aspects of valuation, which has been found to be closely correlated to the long-term performances of stocks by backtesting from 2006 to 2021. The stocks with a higher GF Score generally generate higher returns than those with a lower GF Score. Therefore, when picking stocks, investors should invest in companies with high GF Scores. The GF Score ranges from 0 to 100, with 100 as the highest rank.
1. Financial strength rank: 4/10
2. Profitability rank: 6/10
3. Growth rank: 2/10
4. GF Value rank: 8/10
5. Momentum rank: 2/10
Based on the above method, GuruFocus assigned Newell Brands Inc the GF Score of 64 out of 100, which signals poor future outperformance potential.
Understanding Newell Brands Inc's Business
Newell Brands Inc is an American global consumer goods company with a market cap of $4.28 billion and sales of $8.55 billion. The company operates through five segments: Commercial Solutions, Home Appliances, Home Solutions, Learning and Development, and Outdoor and Recreation. The Learning and Development segment, which offers baby gear, infant care products, writing instruments, art products, and labeling solutions, generates most of the firm's revenue. The company's operating margin stands at 4.83%.
Financial Strength Breakdown
Newell Brands Inc's financial strength indicators present some concerning insights about the company's balance sheet health. The company's interest coverage ratio of 1.56 positions it worse than 87.28% of 1352 companies in the Consumer Packaged Goods industry. This ratio highlights potential challenges the company might face when handling its interest expenses on outstanding debt. The company's Altman Z-Score is just 0.69, which is below the distress zone of 1.81. This suggests that the company may face financial distress over the next few years. Additionally, the company's low cash-to-debt ratio at 0.05 indicates a struggle in handling existing debt levels. Furthermore, the company's debt-to-Ebitda ratio is 52.72, which is above Joel Tillinghast's warning level of 4 and is worse than 97.98% of 1334 companies in the Consumer Packaged Goods industry.
Growth Prospects
A lack of significant growth is another area where Newell Brands Inc seems to falter, as evidenced by the company's low Growth rank. The company's revenue has declined by -0.4 per year over the past three years, which underperforms worse than 72.97% of 1713 companies in the Consumer Packaged Goods industry. Stagnating revenues may pose concerns in a fast-evolving market. Lastly, Newell Brands Inc predictability rank is just one star out of five, adding to investor uncertainty regarding revenue and earnings consistency.
Conclusion
Given the company's financial strength, profitability, and growth metrics, the GuruFocus Score Rating highlights the firm's unparalleled position for potential underperformance. While Newell Brands Inc has a rich history in the Consumer Packaged Goods industry, its current financial health and growth prospects may not be as promising. Investors should consider these factors when making investment decisions.
GuruFocus Premium members can find more companies with strong GF Scores using the following screener link: GF Score Screen
This article first appeared on GuruFocus.
