Newell Brands (Nasdaq: NWL) might not be a household name itself, but its products certainly are.
The company owns a powerful portfolio of consumer goods brands including Rubbermaid, Sharpie, Coleman, Yankee Candle, and many others. With more than 25 brands generating approximately 90% of its $7.6 billion in annual revenue, Newell has significant reach across retail and commercial markets.
Looking at Newell’s stock chart, it’s been a true roller coaster ride. After reaching highs around $11.50 in late 2023 and again in December 2024, the stock has tumbled dramatically, recently touching lows below $5.
This steep 57% decline from its recent peak has many investors wondering if Newell is a bargain or a value trap.
Despite the stock’s poor performance, there are some encouraging signs in the company’s recent financial results.
Newell’s fourth quarter 2024 showed improved gross margins of 34.2%, up from 29.9% in the prior year. This represents the sixth consecutive quarter of year-over-year gross margin growth.
The company also delivered normalized EBITDA of $900 million for the full year, a solid 15% increase from $782 million in 2023. It also reduced its leverage ratio from 5.8x to 4.9x during the same period.
Newell’s management team is focused on strengthening its economics. They’re executing a turnaround plan which includes focusing on top brands, expanding distribution in fast-growing channels, and building a more efficient supply chain. The company also successfully refinanced $1.25 billion of debt in the fourth quarter of 2024, demonstrating strong support from investors.
When we put Newell Brands through The Value Meter’s analysis, we find a fascinating contradiction. The company’s enterprise value-to-net asset value ratio sits at just 2.48, significantly below the average of 5.72 for companies with positive net assets. At first glance, this suggests the stock might be undervalued.
However, Newell’s free cash flow generation tells a different story…
The company has produced positive free cash flow in only two of the past four quarters, with its free cash flow averaging just 1.97% of its net assets. While this is better than the -0.70% average for companies with similar cash flow patterns, it’s not strong enough to justify a higher valuation.
The Value Meter rates Newell Brands as “Appropriately Valued” – neither a bargain nor overpriced. The company’s deeply discounted asset valuation is balanced by its inconsistent cash generation, creating a equilibrium in its current share price.
