small-cap

Should You Exit This NYSE-Listed Consumer Discretionary Stock - TUP

Apr 13, 2022 12:00 AM PDT | Team Kalkine
Should You Exit This NYSE-Listed Consumer Discretionary Stock - TUP

 

Tupperware Brands Corporation

TUP Details

Tupperware Brands Corporation (NYSE: TUP) is a global consumer goods company that develops innovative and environmentally responsible products. TUP produces and distributes culinary, home storage, and cosmetic products under the trademark name "Tupperware". It sells products primarily through its 3.2 million independent distributors in approximately 80 countries.

Why Investor Should Exit?

  • Topline and bottom-line Stress: Because of Covid19 in the Asia Pacific and Europe, the business sees minor stress in revenue, which increased by 3% to USD 1,602.3 million in FY21 compared to 1557.8 million in FY20, and a decline in continuing income to USD 198.2 million compared to 206.7 million in FY21 and FY20, respectively.
  • Average Inventory Days v/s Industry Median: In FY 2021, the company's average inventory days were 159.7 days, far higher than the industry median of 112.0 days. A more significant number of days' inventory outstanding suggests that a firm cannot convert its inventory into revenue quickly enough. This might be due to poor sales, or an overabundance of goods purchased. Having too much idle inventory may harm a business since it can cause the merchandise to become outdated and unsellable.
  • Leveraged Balance Sheet: TUP is exposed to a larger balance sheet risk than its rivals, with a long term debt of USD 700.5 million as of December 31, 2021, compared to USD 258.6 million as of December 31, 2020. Furthermore, its long-term debt-to-total-capital ratio was 139.5%, compared to 25.1% for the same time across the industry. The company's leveraged financials put it on the edge of massive swings due to even tiny interest rate adjustments.
  • High Dependence on Sales Organizations: The company relies heavily on independent sales organizations and people to reach end customers. Any substantial disruption in this distribution network might negatively impact TUP’s financial position and performance.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

Source: Analysis by Kalkine Group

Stock Recommendation:

TUP' stock price has increased 32.46% in the past three months and is currently trading close to the mid-point of its 52-week range of USD 29.20 to USD 13.28. The stock is currently trading above its 50 and 200 DMA levels, and its RSI Index is at ~61.35. We have valued the stock using the EV/Sales multiple-based relative valuation methodology and arrived at a target price of USD 16.29.

Considering the fall in the bottom line, top line stress, high average inventory days, high leverage, and current valuation, we recommend a "sell" rating on the stock at the current price of USD 20.09 as of April 12, 2022, at 08:00 AM PDT.

Technical Summary Analysis:

TUP’s Technical Price Chart (as of April 12, 2022, at 10:00 AM ET). Source: REFINITIV, Analysis by Kalkine Group

Note 1: The reference data in this report has been partly sourced from REFINITIV.