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Newell Rubbermaid (NYSE:NWL) is a sustainable business, selling at a good price. The company has undergone restructuring for years and is now starting to benefit in terms of its financials. Newell's management has done a good job of identifying winner brands and letting go of the others. The company should perform well in the long term. Long-term investors are advised to add this stock to their portfolio.

Some key factors in the analysis:

1. Business Model

Newell has a sustainable business model that focuses on creating and maintaining very famous and likeable brands and delivering superior customer service. In addition, the company focuses on producing and procuring products at a competitive cost. The company also benefits from its experienced management.

Some of Newell's very popular products are Sharpie, Paper Mate, Rubbermade and Parker. The management recognizes the importance of these brands and is working hard to maintain their brand image by emphasizing the best performing brands while whittling down others.

Newell differentiates itself through its high-quality customer service. For instance, it offers consistent on-time delivery of products to its customers. It uses 'just-in-time' strategy to support its retailers in achieving lower inventory carrying costs and increasing their return on investment. In addition, to develop long-term mutually beneficial relationships with its customers, the company offers innovative merchandising support and various in-store services.

To reinvent itself, the company has devised a "Growth Game Plan," which will allow it to build a bigger, faster growing, more profitable company. The key factors falling under this new plan are 'Business Model,' 'Where To Play,' and '5 Ways To Win.'

Under the 'Business Model' factor, the company plans to build "consumer brands that win at the point of decision through excellence in performance, design and innovation." Under 'Where To Play,' it plans to invest in companies with the best opportunities for growth. Under '5 Ways To Win' it hopes to increase its presence in the emerging markets.

The business has had some good management in the last few years. Mark Ketchum, who was the CEO for six years retired in 2011. However, before retiring, he made tough decisions at the company and put the company on sound footing. The new CEO, Michael Polk, has several years of experience in the industry, due to his work at Unilever and P&G. Polk, like his predecessor, is focused on supporting the best-performing brands, along with cutting costs.

2. Risks

The company must continue to provide good customer service and make smart decisions such as divesting itself of the under performing brands. It must also continue to hire the best managers available so as to promote wise decisions in this competitive business. This industry needs loads of management and restructuring and the company that best identifies and retains the leading brands of the future while getting rid of the others, will lead the market.

3. Cash Reserves

The current ratio of the company is lackluster, at 1.44. On December 31st, 2012, the current assets were $2.2 billion, while the current assets were $1.5 billion. The company could use higher working capital. However, it seems unlikely to appear in the near future since the management expressed the desire to reduce working capital under their '5 Ways To Win.'

The long-term debt-to-equity ratio seems fairly manageable at .853. Long-term investors always appreciate focus on strengthening the balance sheet, but a persistent focus on increasing operating margins has replaced any such need at Newell.

Even though the liquidity and leverage are less than ideal, they are not bad enough to raise alarms. The company's strong brands should help it stay in the business for a long time and overcome these short-term financial problems.

4. Stock Price

Newell's stock has a relatively low PE ratio of 19.45. Compared with the mean S&P 500 PE ratio of 18.7, the stock is only slightly expensive. However, in view of the growth opportunities available to the company, the price seems a bargain. The stock is a buy for long-term investors.

Conclusion

Even though the stock doesn't have the competitive advantage of a Starbucks (NASDAQ:SBUX) or Whole Foods (NASDAQ:WFM), it still carries some good potential for sustenance. The company has some very good brands that would be around for a long time. With its focus on restructuring, good management can lead the company to much higher and sustained profitability. Newell Rubbermaid is a "BUY" for the long term investors.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Source: Newell Rubbermaid: Strong Brands Should See The Company Through