We came across a bullish thesis on Newell Brands Inc. (NWL) on Substack by Unemployed Value Degen. In this article, we will summarize the bulls’ thesis on NWL. Newell Brands Inc. (NWL)’s share was trading at $6.80 as of Feb 21st. NWL’s trailing and forward P/E were 10.62 and 9.19 respectively according to Yahoo Finance.
A supermarket aisle filled with Household and Personal Care Products.
Newell Brands (NWL) faced a brutal market reaction to its latest earnings report, with shares plunging from around $10 to just over $7. Despite this, the company remains on track with its well-executed turnaround strategy, now in its sixth consecutive quarter of improvement. The negative reaction stemmed from management’s guidance for a weaker next quarter, though this aligns with historical seasonality. Some of Newell’s brands are strong during back-to-school season, while others peak at Christmas, making the upcoming quarter the weakest by nature. The market, seemingly programmed to sell off any downward guidance, overreacted, creating a compelling buying opportunity. Newell remains on its path toward a $25 stock price, and now investors can enter at a significantly discounted level.
The key issue holding NWL back is revenue growth, as the market wants more than just cost-cutting and margin expansion. Management has committed to a return to revenue growth in 2025, making this a pivotal year. In the meantime, Newell remains GAAP profitable and continues paying a modest dividend. The stock’s sell-off was exacerbated by unfortunate timing, coinciding with a 4.3% inflation expectations report that spooked the broader market. Beyond financials, the company’s supply chain reshoring strategy is progressing well, with minimal exposure to China outside of its baby segment. While there is some reliance on Mexico, Newell has sufficient excess capacity in its U.S. factories to continue reshoring without substantial capital expenditures.
Historically, Newell has traded at a 1.40x price-to-sales multiple in growth periods and 1.0x in more stable times, yet today it trades at just 0.39x. The new management team inherited a tough situation, proposed a credible turnaround plan, and has delivered on that plan effectively. With revenue growth expected to resume in 2025, there is no reason to doubt their ability to execute. At $7.16 today, Newell Brands remains a deeply undervalued stock with a clear path toward $25.96 by the end of 2026.
Newell Brands Inc. (NWL) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 29 hedge fund portfolios held NWL at the end of the third quarter which was 28 in the previous quarter. While we acknowledge the risk and potential of NWL as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NWL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.