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The legendary brand is an MLM company with consistent growth.
Legendary investor Peter Lynch always said the best investments are often right under your nose. I always try to pay attention to my surroundings, and the other day, as I reached into a drawer to find something to put my kid’s lunch in, an investment was staring me in the face.
Tupperware Stock Analysis
Tupperware (NYSE:TUP). Interesting. I wondered if it was public. A brand like this had to have been purchased by a conglomerate by now, I thought. It still has its own ticker symbol, as you can see, so it is public and it remains its own brand.
It also turns out it has expanded way beyond plastic containers into beauty and personal care products. I would have though that to be a case of “diworseification”, but since Tupperware is more about lifestyle than plastic, it kind of makes sense. Its other famous brand include Armand Dupree, Avroy Shlain, BeautiControl, Fuller, NaturCare, Nutrimetics, Nuvo and Swissgarde.
This is beyond the core business of serving dishes, microwaves, knives, cookware and ovenware.
Tupperware is a premium brand in the storage arena because, in case you tried to buy another plastic kitchen storage product, they have the best product. All the others are terrible. The tops never snap on properly, and they use cheaper plastic.
I discovered that Tupperware also has an incredible distribution network. That may sound odd for a manufacturer who probably should use a distribution firm of some kind, like many other retailers. Well, it turns out that Tupperware is an incredibly successful multi-level marketing company, and a legitimate one at that.
There are 1,800 distributors, 61,000 managers and 1.5 million dealers. The beauty line alone has 1.2 million salespeople. Tupperware cut out the middleman, and instead empower regular people to sell its fabulous products. Instead of spending money on distribution, it’s how they MAKE money.
While Tupperware is a player in the MLM space, it is a far cry from the charges being leveled at Herbalife (NYSE:HLF). Herbalife’s structure is more complicated to understand. Tupperware’s process is totally transparent.
Financially, let’s compare it to Newell Rubbermaid (NYSE:NWL). Here’s a look at what matters most, namely margins.
The operating margins for Tupperware stock are 15.31% vs. 13.23% for NWL.
The net margins for Tupperware stock are 9.01% vs. 8.97% for NWL.
Tupperware’s financials are exactly as solid as you might expect from a boring global brand name: $83 million in cash and only $617 million in debt, although the latter has been gradually increasing.
Free cash flow has been consistent, up from $200 million just a few years ago to over $260 million last year — more than twice what is necessary to pay the dividend, which offers a 3.7% yield. Tupperware uses part of its free cash to repurchase stock.
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 12%, and when you factor in the dividend, you’re looking at 15.7%, which is magnificent for a company like this — still growing after all these years. A 12 P/E on 2014 earnings of $2 give it a fair value of $85. It trades at $70, so it’s arguably a little underpriced. It also pays a dividend.
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 stock.
Lawrence Meyers has no position in TUP or HLF.