Is Tupperware a Value Trap?

Tupperware (TUP) trades at just 5x the last 12 months’ earnings, 4.56x forward earnings.

That’s about as cheap as a stock gets.

But with a 10-year revenue growth rate of -2.75%, it’s hard to fall in love with this company.

To combat the slide, the board put Miguel Fernandez into the role of President and CEO.

With a new team of executives, the company aimed to create a more digitalized and data-driven approach to revenue growth while restructuring operations to become more efficient.

So far, things are looking up.

The last 12 months of revenue is the first increase compared to the prior year since 2017. Margins also began to improve.

Yet, cash flow is at its lowest level in a decade.

Heck, the stock came in dead last in the top searches for packaging and container stocks by financial pros last month.

So, it’s not as if folks are clamoring for shares.

But maybe they should be…

Tupperware’s Business

As a packaging and storage consumer products company, Tupperware has been around for more than 75 years.

The company designs, manufactures, and sells prep, storage, and serving solutions for the kitchen and home, as well as a cookware line, knives, microwave products, microfiber textiles, water-filtration-related items, and an array of on-the-go consumer products under the Tupperware brand name.

Additionally, Tupperware manufactures and distributes beauty and personal care products, skin care, cosmetics, toiletries, fragrances, and nutritional products under the Fuller, NaturCare, Nutrimetics, and Nuvo brands.

The company distributes its products in 80 countries primarily thorough an independent sales force, including independent distributors, directors, managers, and dealers, also known as multi-level marketing.

Back in the day, salespeople were known to hold ‘Tupperware parties’ to showcase their products.

As we noted earlier, the new CEO Miguel Fernandez, focused the company on selling off non-core assets, paying down debt, and rolling out a new growth strategy with an eye towards eco-friendly products.

Financials

As we mentioned earlier, Tupperware has only recently started to see its financials turnaround.

What’s interesting is that even though revenues and margins improved, net income fell as did operating cash flow.

So what happened?

Well, the company took a huge hit on disposal for discontinued operations, specifically Avory Shlain, House of Fuller, Nutrimetics, and Nuvo.

The loss was listed at $148.1 million which hit both net income and cash.

Otherwise, cash from operations ca, in at around $136.2 million for the 39 weeks ending Sept. 25.

All-in-all, the company’s business looks pretty good.

We want to note the company carries hardly any long-term debt and around $500 million in short-term debt. 

That gives it a solid balance sheet to work with when it decides to invest in its future.

Lastly, although Tupperware no longer pays a dividend, we expect that to change in the next several years.

Valuation

When we said Tupperware was cheap, we weren’t kidding around.

While the forward P/E does look ominous, the non-GAAP version paints a truer picture of what we can expect given the discontinuing operations.

Incidentally, if you adjust the price to operational cash flow for these items, you get a nice 3.52x

Our Opinion – 9/10

Tupperware appears to be turning around its business line. 

Even though shares have run considerably, if they start to show any type of growth, the stock could really take off.

And even if it doesn’t, normal business operations would generate nice cash flows.