Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Tupperware
So what: Tupperware reported earning $1.03 per share in Q2, a 12% increase over last year's haul. But it took a 19% increase in revenues to produce this profit, highlighting weaker profit margins.
Now what: Between that trend of profitability slipping, and Tupperware's recent inability to produce free cash flow at the level it claims for "GAAP profits," I can't blame investors for starting to lose faith in the company. With just over $200 million in FCF generated for the past 12 months, Tupperware shares now sell for a rich 22 times multiple to these cash profits. That's pricey relative to analyst expectations of 15% long-term profit growth at the company -- and Tupperware's 1.7% dividend yield isn't enough to make up the difference.
Long story short: I'd more likely be short this stock than long.
Disagree? Think Tupperware's going to pop the top in the third quarter? Add it to your Watchlist and see if you're right.