Don't Spoil the Tupperware Party
09/22/2009 10:39 am EST
Jocelynn Drake of Schaeffer’s Investment Research says the famed household-products company has attractive technicals and lots of room to advance.
The company has revamped its plastic storage containers, expanded into beauty products, and experienced high growth in its overseas markets. At the same time, the shares are relatively cheap, as investors can still grab up the stock for less than 12x next year's earnings.
Analysts are fans of the shares. "We believe the market is not giving Tupperware sufficient credit for improving fundamentals over the last several years, including a shift in business mix to high-growth emerging markets and rebounding trends in developed markets," notes Morgan Stanley analyst Dara Mohsenian.
Meanwhile, JP Morgan analyst John Faucher noted that he was "particularly encouraged by the sequential improvement in Tupperware's local currency sales trends" in the last quarter. The company also has a history of surprising on the up side in double-digit percentages since 2007.
While the firm has not been immune from consumer cutbacks during the recession, [it] still managed to report strong second-quarter results in July, and its increased guidance shows that developed markets are regaining strength while emerging markets continue to be a big mover.
Despite the optimism of the article, investors have yet to jump on the shares of TUP. In fact, sentiment is extremely bearish towards the container giant. The Schaeffer's put/call open interest ratio for TUP [recently stood] at 1.93, as put open interest nearly doubles call open interest among options slated to expire in less than three months.
This reading is higher than 98% of all those taken during the past year. In other words, near-term options players have been more skeptically aligned toward the shares only 2% of the time during the past year.
Wall Street has yet to jump on this stock, as three of the four analysts following TUP rate it a Hold. Any upgrades and/or fresh coverage could boost the security significantly higher.
Technically speaking, the equity has soared nearly 83% since the beginning of 2009. Since mid-March, the stock has staged a solid rally along the support of its ascending ten-week moving average. This combination of technical strength and lingering pessimism has bullish implications from a contrarian perspective.
(The stock closed above $40 Monday, not too far below its 52-week high—Editor.)