by Lawrence Meyers | February 10, 2012 11:42 am
I found another investment right under my nose, as I was digging through a kitchen drawer for something to hold my leftover pasta. As I held the Tupperware (NYSE:TUP) container in my hands, I flashed back to 1996, when a friend held a Tupperware party at his (yes, his) house. I thought it was intended as a joke, but it turns out this was a popular trend at the time.
Think Tupperware is just found in the homes of older people and bachelors looking to save their leftovers? No way. It is a series of brands — and yes that is plural. The company also sells beauty and personal care products under the Armand Dupree, Avroy Shlain, BeautiControl, Fuller, NaturCare, Nutrimetics, Nuvo and Swissgarde brand names. But never fear, plastic fans. It’s still making serving dishes, microwaves, knives, cookware and ovenware.
Two reasons leap to mind as to why Tupperware remains a premium brand name. For starters, have you ever used a competitor’s storage product? They stink. The tops never snap on properly, and they use cheaper plastic. That’s what you and I notice. What we never see, however, is the extraordinary distribution network that has put Tupperware into every possible place you can buy its products.
How extraordinary is this network? 1,800 distributors, 61,000 managers and 1.5 million dealers. The beauty line alone has 1.2 million salespeople.
Financially, let’s compare it to Newell Rubbermaid (NYSE:NWL). Here’s a quick look at margins:
|Gross margins||Operating Margins||Net margins|
Tupperware’s financials are exactly as solid as you might expect from a boring global brand name: $138 million in cash and only $415 milion in debt, and the latter has been gradually decreasing from one year to the next. Free cash flow was $200 million over the past year — three times what is necessary to pay the dividend, which the company just pushed up by 20% to a 2.4% yield. Tupperware uses part of its free cash to repurchase stock, to the tune of 1.6 million shares in 2011.
All this is well and good, but is Tupperware a buy or not? Often, a great global brand like this will trade at a premium. In this case, however, Tupperware is fairly priced, and that means buying will yield a nice annual return.
TUP’s earnings are growing at around 13%, and when you factor in the dividend, you’re looking at 15.4%, which is magnificent for a company like this — still growing after all these years. A 13 P/E on 2012 earnings of $5.03 give it a fair value of $65. It trades at $62.38, so it’s arguably a little underpriced.
Investors looking for a company that did just fine during the financial crisis and who want a nice solid growth stock for regular or retirement portfolios should take a close look at Tupperware.
As of this writing, Lawrence Meyers did not hold a position in any of the aforementioned securities. He is president of PDL Capital, Inc., which brokers secure high-yield investments to the general public and private equity. You can read his stock market commentary at SeekingAlpha.com. He also has written two books and blogs about public policy, journalistic integrity, popular culture and world affairs.
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