Household-goods veteran Spectrum Brands (NYSE:SPB) doesn't look like much of a value investment at first glance.

Both sales and earnings fell year over year in the recently reported second quarter, falling short of analyst estimates across the board. That kind of underperformance typically leads to discount-level multiples and share prices. But Spectrum isn't trading at the bargain-basement price one might expect.

Instead, Spectrum shares are trading at a fairly generous 24 times trailing earnings and 4.2 times book value. That's far from deep-discount territory and enough of a deal-breaker to send many value investors elsewhere.

That could be a big mistake.

Lots and lots of batteries.

Image source: Getty Images.

Spectrum is a cash machine

The maker of famous consumer-goods brands such as Rayovac batteries, Remington shavers, Black & Decker power tools, Spectracide pest-killer treatments, Armor All car care products, and Tetra aquarium tools has many things going for it.

Spectrum's modest earnings are the result of an effective tax strategy. Pre-tax profits added up to $415 million over the past four quarters, but free cash flows stopped at $682 million and EBITDA profits reached all the way up to $841 million.

In other words, Spectrum squeezes a deceptively large amount of cash out of its top-line sales. Basing the company's market value on cash results instead of GAAP earnings will paint a very different picture of Spectrum's true value.

The stock's price-to-free cash flow ratio stands at less than 11 today. By comparison, sector peers Whirlpool (NYSE:WHR) and Energizer Holdings (NYSE:ENR) -- both of whom carry lower P/E ratios than Spectrum Brands -- have seen their share price soaring above 18 times trailing free cash flows.

Strong business trends

Moreover, Spectrum Brands is enjoying strongly positive trends in its fundamental business results.

Annual revenues have increased by 53% over the past five years, driving earnings more than 400% higher and boosting free cash flows more than a hundredfold:

SPB Free Cash Flow (TTM) Chart

SPB Free Cash Flow (TTM) data by YCharts

We are witnessing a strong return from the brink of disaster. Spectrum Brands declared bankruptcy in 2009, only to emerge six months later with a strong long-term plan. Flying under the radar of investors who focus only on bottom-line earnings, this stock looks like a great value play for the long term right now.

Anders Bylund has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.