Seeking Alpha: Spectrum Brands Has The FCF Juice, But Valuation Is Trickier

Debt-fueled acquisition stories often have unhappy endings, and Spectrum Brands (SPB) has already gotten itself into trouble before. That was then, though, and the company's mix of consumer products (many of which are positioned as leading value brands) has been generating better free cash flow of late. Add in some leverage to the housing recovery through the acquisition of Stanley Black & Decker's (SWK) HHI segment and this is a more interesting story than it was even just a year ago.

It's not a story without some risks. The company has an especially high debt load, and the ownership/intentions of Harbinger Group (HRG) adds an element of uncertainty not present at companies like Jarden (JAH) or Helen of Troy (HELE). Moreover, I wouldn't rule out the risk of Spectrum's brands getting squeezed between consumers still willing (and able) to pay up for the premium brands and those consumers who turn to even cheaper private label or imported brands. Valuation is likewise a tricky matter, as the shares trade above past norms and only look cheap on a cash flow basis if you ignore the large debt load.

Read more here:
Spectrum Brands Has The FCF Juice, But Valuation Is Trickier