Has Tupperware Become the Perfect Stock?

Every investor would love to stumble upon the perfect stock. But will you ever really find a stock that provides everything you could possibly want?

One thing's for sure: You'll never discover truly great investments unless you actively look for them. Let's discuss the ideal qualities of a perfect stock, then decide if Tupperware (NYSE: TUP  ) fits the bill.

The quest for perfection
Stocks that look great based on one factor may prove horrible elsewhere, making due diligence a crucial part of your investing research. The best stocks excel in many different areas, including these important factors:

  • Growth. Expanding businesses show healthy revenue growth. While past growth is no guarantee that revenue will keep rising, it's certainly a better sign than a stagnant top line.
  • Margins. Higher sales mean nothing if a company can't produce profits from them. Strong margins ensure that company can turn revenue into profit.
  • Balance sheet. At debt-laden companies, banks and bondholders compete with shareholders for management's attention. Companies with strong balance sheets don't have to worry about the distraction of debt.
  • Money-making opportunities. Return on equity helps measure how well a company is finding opportunities to turn its resources into profitable business endeavors.
  • Valuation. You can't afford to pay too much for even the best companies. By using normalized figures, you can see how a stock's simple earnings multiple fits into a longer-term context.
  • Dividends. For tangible proof of profits, a check to shareholders every three months can't be beat. Companies with solid dividends and strong commitments to increasing payouts treat shareholders well.

With those factors in mind, let's take a closer look at Tupperware.

Factor

What We Want to See

Actual

Pass or Fail?

Growth 5-Year Annual Revenue Growth > 15% 8.2% Fail
  1-Year Revenue Growth > 12% 12.4% Pass
Margins Gross Margin > 35% 66.7% Pass
  Net Margin > 15% 8.4% Fail
Balance Sheet Debt to Equity < 50% 124.0% Fail
  Current Ratio > 1.3 1.14 Fail
Opportunities Return on Equity > 15% 33.8% Pass
Valuation Normalized P/E < 20 18.52 Pass
Dividends Current Yield > 2% 2.3% Pass
  5-Year Dividend Growth > 10% 6.4% Fail
       
  Total Score   5 out of 10

Source: S&P Capital IQ. Total score = number of passes.

Since we looked at Tupperware last year, the company has kept its five-point score. Growth has picked up a bit, but a much larger debt load carries some concerns for investors.

Tupperware's namesake plastic storage containers are nearly ubiquitous in U.S. households. As a result, the company has had to go international to find growth. Lately, that's been extremely lucrative, with sales in India and Brazil both up more than 60% in the past year. Tupperware now gets a whopping 90% of its business from overseas markets, where its dealer-driven "Tupperware party" model gives it a strong competitive advantage over the more traditional sales methods of Newell Rubbermaid (NYSE: NWL  ) .

Moreover, Tupperware isn't just about leftovers anymore. The company went head-to-head against Avon Products (NYSE: AVP  ) by offering beauty products, along with other items including appliances and baby supplies. Now, with Avon finding itself the subject of a takeover bid, the question is whether Tupperware will follow suit -- or make its own move for Avon.

Still, the company has to deal with competition and price pressure. Dow Chemical (NYSE: DOW  ) helped create Ziploc, which privately held S.C. Johnson now owns and has expanded to produce disposable food containers. Similarly, Glad, which is majority-owned by Clorox (NYSE: CLX  ) , went beyond trash bags to produce Tupperware-like containers as well.

For Tupperware to keep growing, it needs to demonstrate the value proposition its products give customers as well as keep targeting new markets. If it can keep capitalizing on its emerging-market opportunities, though, Tupperware could get a lot closer to perfection in the years ahead.

Keep searching
No stock is a sure thing, but some stocks are a lot closer to perfection than others. By looking for the perfect stock, you'll go a long way toward improving your investing prowess and learning how to separate the best investments from the rest.

Tupperware isn't the perfect stock, but we've got some ideas you may like better. Let me invite you to learn about three smart long-term stock plays in the Fool's latest special report. It's yours for the taking and is absolutely free, but don't miss out -- click here and read it today.

Click here to add Tupperware to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

Fool contributor Dan Caplinger doesn't own shares of the companies mentioned in this article. The Motley Fool owns shares of Tupperware Brands and Clorox. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool has a disclosure policy.


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