- The company has great near and long-term earnings growth potential.
- The company is in the recovering housing industry.
- The stock is currently experiencing bearish technicals.
Whirlpool Corporation (NYSE:WHR) is a manufacturer and marketer of home appliances operating in four segments: North America, Latin America, EMEA (Europe, Middle East and Africa) and Asia. The company manufactures and markets a line of home appliances and related products such as laundry appliances, refrigerators and freezers, cooking appliances, dishwashers, mixers and other portable household appliances. On January 30, 2014, the company reported fourth quarter earnings of $2.97 per share, which missed the consensus analysts' estimates by $0.07. During the past year the company's stock price is up 22.65% excluding dividends and is beating the S&P 500 (NYSEARCA:SPY), which has gained 20.39% in the same time frame. I've already purchased a batch of the stock for my growth portfolio and am down 0.03% on the batch. With all this in mind, I'd like to take a moment to evaluate the stock on a fundamental, financial, and technical basis to see if right now is a good time to purchase more of the stock for my portfolio.
The company currently trades at a trailing 12-month P/E ratio of 14.1, which is inexpensively priced, but I mainly like to purchase a stock based on where the company is going in the future as opposed to what it has done in the past. On that note, the 1-year forward-looking P/E ratio of 10.17 is currently inexpensively priced for the future in terms of the right here, right now. Next year's estimated earnings are $14.2 per share and I'd consider the stock inexpensive until about $213. The 1-year PEG ratio (0.87), which measures the ratio of the price you're currently paying for the trailing 12-month earnings on the stock while dividing it by the earnings growth of the company for a specified amount of time (I like looking at a 1-year horizon), tells me that the company is inexpensively priced based on a 1-year EPS growth rate of 16.16%. The company has great near-term future earnings growth potential with a projected EPS growth rate of 16.16%. In addition, the company has great long-term future earnings growth potential with a projected EPS growth rate of 21%.
On a financial basis, the things I look for are the dividend payouts, return on assets, equity and investment. The company pays a dividend of 1.73% with a payout ratio of 24% of trailing 12-month earnings while sporting return on assets, equity and investment values of 5.4%, 17.8% and 16%, respectively, which are all respectable values. Because I believe the market may get a bit choppy here and would like a safety play, I don't believe the 1.73% yield of this company is good enough for me to take shelter in for the time being.
Looking first at the relative strength index chart [RSI] at the top, I see the stock in middle-ground territory with a value of 53.67 and downward trajectory. I will look at the moving average convergence-divergence [MACD] chart next. I see that the black line is above the red line but with downward trajectory with the divergence bars decreasing in height, indicating bearish momentum. As for the stock price itself ($144.42), I'm looking at $152.81 to act as resistance and the 20-day simple moving average (currently at $141.46) to act as support for a risk/reward ratio which plays out to be -2.05% to 5.81%.
If you believe the housing market is still appreciating then you better believe that consumers will be purchasing household appliances and Whirlpool is the way to play the trend in the stock market. Fundamentally, the company is inexpensively priced based on 2015 earnings and inexpensive on future growth potential. Financially, the dividend is pretty small but is covered very well. On a technical basis I believe there is some downside to come. Due to the bearish technicals, low dividend yield, and rollercoaster movements of the overall market I will not be pulling the trigger right now because I believe I can get it at a lower price.
Disclaimer: This article is meant to serve as a journal for myself as to the rationale of why I bought/sold this stock when I look back on it in the future. These are only my personal opinions and you should do your own homework. Only you are responsible for what you trade and happy investing!
Disclosure: I am long WHR, SPY. 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.