Rating Update: Stock Rating Z-unrated (5/21/19)-Tupperware Brands Corp (TUP).

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BUSINESS

Tupperware Brands Corporation operates as a direct-to-consumer marketer of various products across a range of brands and categories in Europe, Africa, the Middle East, the Asia Pacific, North America, and South America. The company engages in the manufacture and sale of design-centric preparation, storage, and serving solutions for the kitchen and home, as well as a line of cookware, knives, microwave products, microfiber textiles, water-filtration related items, and an array of products for on-the-go consumers under the Tupperware brand name. It also manufactures and distributes skin and hair care products, cosmetics, bath and body care, toiletries, fragrances, jewelry, and nutritional products under the Avroy Shlain, Fuller, NaturCare, Nutrimetics, and Nuvo brands. The company sells its products directly to distributors, directors, managers, and dealers.
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INVESTMENT RATING

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TUP’s future returns on capital are forecasted to fall short of the cost of capital. Accordingly, the company is expected to continue to be a major Value Eraser.

Tupperware Brands is currently unrated.

Tupperware Brands’ targeted value is not available.
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Tupperware Brands has a Power Rating of 8. (TUP’s very low Power Rating indicates that it only has a higher likelihood of achieving favorable investment performance over the near to intermediate term than 8% of companies in the universe.)
Factors contributing to this very low Power Rating include: TUP’s earnings estimates have fallen very significantly in recent months; recent price action has been unfavorable; and is in a slightly weakened position current.

INVESTMENT PROFILE

TUP’s financial strength is average. Financial strength rating is 45.
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Relative to the S&P 500 Composite, Tupperware Brands Corp has slightly more Growth than Value characteristics; its appeal is likely to be to investors neutral towards Income; the perception is that TUP is higher risk. Relative weaknesses include: low forecasted profitability, low financial strength, high financial leverage, and low historical growth. TUP’s valuation is low: high dividend yield, low P/E ratio, and high price/book ratio. TUP has unusually low market capitalization.

CURRENT SIGNALS

Tupperware Brands’ current operations are eroding. Return on equity is falling, reflecting: and falling asset utilization.

Tupperware Brands’ current technical position is very weak. The stock price is in a 3.7 month down move. The stock has declined 29.3% from its prior high. The stock price is below its 200 day moving average which is in a downtrend. Tupperware Brands’ stock price decline is extreme and the stock appears oversold.

ALERTS

Positive development: significant quarterly earnings acceleration occurred. Negative development: significant quarterly sales deceleration occurred.
The stock is currently unrated.
Tupperware Brands Corporation (NYSE: TUP) stock closed at $0.30 on 5/21/19 after a major increase of 12.8%. NORMAL trading volume accompanied the advance. The stock has declined -1.4% during the last week and has been extremely weak relative to the market over the last nine months.

CASH FLOW

In 2018, Tupperware Brands generated an increase in cash of +$4.9 million (+3%). Sources of cash were very slightly larger than uses. Cash generated from 2018 EBITDA totalled +$377.3 million. Non-operating sources contributed +$3.6 million (+1% of EBITDA). Cash taxes consumed -$154.0 million (-41% of EBITDA). Re-investment in the business amounted to -$54.6 million (-14% of EBITDA). On a net basis, debt investors provided +$104.3 million (+28% of EBITDA) while equity investors removed -$271.7 million (-72% of EBITDA).
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Tupperware Brands’ Non-operating Income, %EBITDA has exhibited little to no overall change over the period. This stability was accompanied by stability for the Tupperware Brands Corp Peer Group as well. In most years, Tupperware Brands was in the lower quartile and third quartile. Currently, Tupperware Brands is above median at +1% of EBITDA (+$3.6 million).

Tupperware Brands’ Cash Taxes, %EBITDA experienced a very strong overall downtrend over the period. This downtrend was accompanied by an opposite trend for the Tupperware Brands Corp Peer Group. In most years, Tupperware Brands was in the second quartile and top quartile. Currently, Tupperware Brands is lower quartile at -41% of EBITDA (-$154.0 million).

Tupperware Brands’ Business Re-investment, %EBITDA has enjoyed a very strong overall uptrend over the period. This improvement was accompanied by an opposite trend for the Tupperware Brands Corp Peer Group. In most years, Tupperware Brands was in the top quartile and second quartile. Currently, Tupperware Brands is above median at -14% of EBITDA (-$54.6 million).

Tupperware Brands’ Debt Investors, %EBITDA has exhibited a volatile overall uptrend over the period. This improvement was accompanied by a similar trend for the Tupperware Brands Corp Peer Group. (Since 2015 Debt Investors, %EBITDA has accelerated very sharply.) In most years, Tupperware Brands was in the lower quartile and second quartile. Currently, Tupperware Brands is substantially above median at +28% of EBITDA (+$104.3 million).

Tupperware Brands’ Equity Investors, %EBITDA has experienced a downtrend over the period. This downtrend was accompanied by a similar trend for the Tupperware Brands Corp Peer Group. In most years, Tupperware Brands was in the second quartile and top quartile. Currently, Tupperware Brands is below median at -72% of EBITDA (-$271.7 million).

Tupperware Brands’ Change in Cash, %EBITDA has exhibited little to no overall change over the period. This stability was accompanied by a downtrend for the Tupperware Brands Corp Peer Group. In most years, Tupperware Brands was in the second quartile and lower quartile. Currently, Tupperware Brands is at the upper quartile at +1% of EBITDA (+$4.9 million).
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Tupperware Brands’ Cash, %Revenue has exhibited little to no overall change over the period. This stability was accompanied by stability for the Tupperware Brands Corp Peer Group as well. In most years, Tupperware Brands was in the third quartile. Currently, Tupperware Brands is slightly below median at +7%.

PROFITABILITY

Tupperware Brands’ return on equity has eroded very significantly since 2009 accelerating very sharply after the 2017 level.
A major analytical focus for TUP is a strong positive trend in pretax operating return a significantly offset by very strong negative trend in non-operating factors.
The productivity of Tupperware Brands’ assets rose over the full period 2009-2019: asset turnover has enjoyed a strong overall uptrend although it experienced a very sharp decline after the 2017 high.
Additionally, pretax margin has exhibited little to no overall change although it experienced very sharp improvement from the 2017 level.
Non-operating factors (income taxes and financial leverage) had a significant negative influence on return on equity.
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Tupperware Brands’ return on equity is lower quartile (-85.4%) for the four quarters ended March, 2019.
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Operating performance (pretax return on assets) is above median (18.7%) reflecting asset turnover that is below median (1.40X) and at median pretax margin (13.4%).
Tax “keep” rate (income tax management) is lower quartile (58.2%) resulting in after tax return on assets that is at the lower quartile.
Financial leverage (leverage) is lower quartile (-7.82X).

GROWTH RATES

Overall, Tupperware Brands’ growth rate has slowed very considerably in recent years.
Tupperware Brands’ historical income statement growth and balance sheet growth have diverged. Revenue growth has paralleled asset growth; earnings growth has exceeded equity growth.

Annual revenue growth has been 1.1% per year. (More recently it has been -4.1%.)

Total asset growth has been -1.2% per year. (More recently it has been -4.8%.)

Annual E.P.S. growth has been 1.5% per year.

Equity growth has been -17.5% per year.

Tupperware Brands’ consensus growth rate forecast (average of Wall Street analysts) is 10.0% — substantially above the average of the historical growth measures.
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Relative to the Tupperware Brands Corp Peer Group, Tupperware Brands’ historical growth measures are generally third quartile. Revenue growth (1.1%) has been slightly below median. E.P.S. growth (1.5%) has been below median. Equity growth (-17.5%) has been below median. Total asset growth (-1.2%) has been lower quartile.

Consistent with this pattern, consensus growth forecast (10.0%) is also at the lower quartile.
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PRICE HISTORY

Over the full time period, Tupperware Brands’ stock price performance has been variable and significantly below market. Between July, 2008 and May, 2019, Tupperware Brands’ stock price fell -44%; relative to the market, this was a -75% loss. Significant price moves during the period: 1) May, 2017 – May, 2019: -69%; 2) December, 2013 – January, 2016: -51%; and 3) February, 2009 – April, 2010: +260%.
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TOTAL INVESTMENT RETURNS

Current annual total return performance of -42.8% is lower quartile relative to the S&P 500 Composite.
In addition to being lower quartile relative to S&P 500 Composite, current annual total return performance through April, 2019 of -42.8% is lower quartile relative to Tupperware Brands Corp Peer Group.

Current 5-year total return performance of -18.5% is lower quartile relative to the S&P 500 Composite.
Through April, 2019, with lower quartile current 5-year total return of -18.5% relative to S&P 500 Composite, Tupperware Brands’ total return performance is lower quartile relative to Tupperware Brands Corp Peer Group.
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VALUATION BENCHMARKS

Relative to S&P 500 Composite, TUP’s overall valuation is low. The highest factor, the ratio of enterprise value/assets, is slightly below median. Ratio of enterprise value/earnings before interest and taxes is lower quartile. Price/earnings ratio is lower quartile. Ratio of enterprise value/revenue is lower quartile. Price/equity ratio is unavailable.

Relative to Tupperware Brands Corp Peer Group, TUP’s overall valuation is low. The highest factor, the price/earnings ratio, is lower quartile. Ratio of enterprise value/revenue is near the lower quartile. Ratio of enterprise value/earnings before interest and taxes is lower quartile. Ratio of enterprise value/assets is at the lower quartile. Price/equity ratio is unavailable.
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Tupperware Brands has a major value gap compared to the median valuation. For TUP to rise to median valuation, its current ratio of enterprise value/revenue would have to rise from the current level of 0.97X to 1.61X. If TUP’s ratio of enterprise value/revenue were to rise to 1.61X, its stock price would be lower by $27 to $49.
For TUP to hit lower quartile valuation relative to the Tupperware Brands Corp Peer Group, its current ratio of enterprise value/revenue would have to fall from the current level of 0.97X to 0.88X. If TUP’s ratio of enterprise value/revenue were to fall to 0.88X, its stock price would decline by $-4 from the current level of $22.

VALUE TARGETS

TUP’s future returns on capital are forecasted to fall short of the cost of capital. Accordingly, the company is expected to continue to be a major Value Eraser.
Tupperware Brands’ current Price Target is not available.
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Tupperware Brands’ current Price Target is not available.
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PTR’s return on equity forecast is -0.0% — slightly below our recent forecasts. Forecasted return on equity suffered a dramatic, erratic decline between 2010 and 2018. The current forecast is significantly below the 2015 peak of 130%.

PTR’s growth forecast is 2.7% — slightly above our recent forecasts. Forecasted growth suffered a dramatic, variable decline between 2010 and 2018. The current forecast is above the 2016 low of -2%.

PTR’s cost of equity forecast is 8.0% — slightly above recent levels. Forecasted cost of equity enjoyed a dramatic, erratic decline between 2010 and 2018. The current forecast is below the 2012 peak of 10.6%.
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At Tupperware Brands’ current price of $21.98, investors are placing -Na on its future investments. This view is consistent with the company’s most recent performance that reflected a growth rate of -1.0% per year, and a return on equity of 4.0% versus a cost of equity of 5.0%.
PTR’s 2020 Price Target of $-Na is based on these forecasts and reflects an estimated value of existing assets of $-Na .

About John Lafferty 47332 Articles
During his career, John has developed valuation and stock rating methodologies, managed institutional portfolios and mutual funds, and provided equity research to institutional investors on thousands of companies. He has been Director of Research at PTR since its inception in 2004.

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