Amidst a turbulent market, Spectrum Brands Holdings Inc (SPB, Financial) has experienced a notable daily loss of 11.81% and a 3-month decline of 12.52%. With an Earnings Per Share (EPS) of 44.61, investors are left wondering whether the stock is modestly undervalued. To address this query, a valuation analysis is paramount. We invite readers to delve into the following comprehensive examination of Spectrum Brands Holdings' intrinsic value.
Company Introduction
Spectrum Brands Holdings Inc is a prominent consumer products and home essentials company, known as a supplier of consumer batteries, residential locksets, residential builders' hardware, grooming products, and personal care products. With a diverse portfolio managed across product-focused segments, the company has established a global presence. When juxtaposed with the current stock price of $67.82 and a market cap of $2.40 billion, the GF Value of $84.97 suggests that Spectrum Brands Holdings may indeed be modestly undervalued. This initial comparison sets the stage for a deeper dive into the company's financial health and potential for growth.
Summarizing the GF Value
The GF Value is a unique valuation tool that estimates the intrinsic value of a stock by considering historical trading multiples, a GuruFocus adjustment factor, and future business performance forecasts. Spectrum Brands Holdings (SPB, Financial) appears modestly undervalued based on this metric. The GF Value Line suggests a fair trading value, which the stock price is likely to gravitate towards. Currently, at $67.82 per share, the stock's market cap is $2.40 billion, reinforcing the notion of its undervaluation.
Due to this undervaluation, the long-term return of Spectrum Brands Holdings' stock could potentially exceed its business growth, presenting an attractive opportunity for investors.
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Financial Strength
Investing in companies with solid financial strength is critical to minimize the risk of permanent loss. Spectrum Brands Holdings boasts a cash-to-debt ratio of 1.35, outperforming 65.77% of its peers in the Consumer Packaged Goods industry. With an overall financial strength rating of 5 out of 10, the company's financial health is deemed fair. This assessment is crucial for investors considering a stake in Spectrum Brands Holdings.
Profitability and Growth
Profitable companies, particularly those with a track record of consistent profitability, are generally safer investment bets. Spectrum Brands Holdings has maintained profitability for 6 out of the past 10 years. The company's revenue stood at $2.90 billion with an Earnings Per Share (EPS) of $44.61 over the past twelve months. However, its operating margin of 0.78% ranks lower than 71.27% of its industry counterparts. This suggests fair profitability, with a profitability rank of 5 out of 10.
Growth is a vital aspect of valuation, as it is strongly linked to long-term stock performance. Spectrum Brands Holdings' average annual revenue growth rate of 16.6% surpasses 76.48% of companies within its industry. Nevertheless, its 3-year average EBITDA growth rate stands at 0%, which is less impressive when compared to peers.
ROIC vs WACC
Comparing a company's Return on Invested Capital (ROIC) with its Weighted Average Cost of Capital (WACC) can provide insights into its profitability. Spectrum Brands Holdings' ROIC over the past 12 months is 0.46%, while its WACC is 6.77%, indicating a potential for creating shareholder value. The historical comparison of the company's ROIC versus WACC is shown below:
Conclusion
In summary, Spectrum Brands Holdings (SPB, Financial) presents signs of being modestly undervalued. The company's financial condition and profitability are fair, but its growth needs to be carefully monitored. For those interested in a more detailed financial analysis, Spectrum Brands Holdings' 30-Year Financials can be found here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
