Are “safe stocks” no longer safe?
Last Thursday, global consumer goods stock Newell Brands Inc. (NASDAQ:NWL) scraped a new two-year low of $17.40. Fast forward to today, and NWL is trading at $18.28, up 0.9% at last check, brushing off a price-target cut from Deutsche Bank to $22 from $25.
Newell Brands stock is down 16% in 2022. More bear notes could be on the way, considering five of the eight brokerages covering NWL rate it a "strong buy," with zero "sells" on the books. Plus, the consensus 12-month price target of $27.55 is a 50.8% premium from its current perch.
Options traders have been steering toward puts. The equity's Schaeffer's put/call open interest ratio (SOIR) of 1.39 sits higher than 97% of all annual readings. In other words, short-term options traders are incredibly put-biased right now.
The consumer goods business' inconsistent growth and weak balance sheet make Newell Brands stock a big risk for fundamental-based investors. Although NWL is expected to grow earnings by 4.9% in fiscal 2022 and 9.9% in fiscal 2023, Newell Brands is estimated to see a 4% decline in revenues for fiscal 2022. Estimates for fiscal 2023 have their revenue growth coming in at just 1.4% as well. In addition, the company owes $5.57 billion in total debt and hold only $344 million in cash on their balance sheet.
Nonetheless, with Newell Brands stock’s continued decline, NWL now provides a better valuation and dividend yield for long-term investors to potentially profit from. Newell Brands stock currently trades at a forward price-earnings ratio of 10.03 and a price-sales ratio of 0.75. NWL also offers an attractive dividend yield of 5.15% with a forward dividend of $0.92, making Newell Brands stock an intriguing option for dividend investors.