Spectrum Brands is a home goods company focused on pet products, garden, and personal care. Its fundamentals are not the best for value investment. But, this came up in a screen earlier in 2025 as its price was in freefall and a second look became necessary. SPB makes for an interesting “almost” case study, at least from the full value investment standards of this publication. Watchlist and learn.

A picture of the profile is relevant. The company is a descendant of the French Battery Company, founded in Chicago in 1906. Through corporate mergers and a couple of industrious owners, the FBC became Rayovac in 1930 and had produced over 1 billion leak-proof batteries by 1950. It IPOd in 1997 as ROV and decided to diversify in 2003 into non-battery related household businesses like Remington Products and United Pet Group. In 2005 it became Spectrum upon the acquisition of Tetra, then a major producer of pet fish products.

Today, SPB trades at a market cap in excess of $1 billion and owns over 20 home goods brands like Cutter (mosquito repellent), Tetra (pet fish), Black and Decker, George Forman, and Remington (hair care). The Company’s 3,000 employees have global reach from its Middleton, WI, headquarters, selling through retailers like Target and Wal-Mart, wholesalers, and distributors. 60% of the business is in North America and 40% in pet care.

These brands point to the company’s fundamentals’ being quite good for value investment: name recognition and other consistently demanded home goods make for consistent cash flows and defensibility.

There are storm clouds, however.

The recent prevailing trend of Americans moving to au naturale methods of living, a la sourdough bread and home gardening, will weaken SPB’s demand profile. For now, the Tetras, Cutters, and Black and Deckers will maintain SPB cash flows. But the traditional home goods market of the past 20 years, along with its brands and useability, is dying.

Additionally, while the company’s brands are certainly strong, they are not the leaders, like Weber Grill or luxury products like LVMH, despite long-term quality and defensibility. We could liken this to Warren Buffet’s love of Coke’s leadership, for instance: no need to ever worry about that beverage going out of fashion.

And finally, fundamentals. Net Total Liabilities to EBITDA of 4.0x is elevated, even for a company of this size and earning profile of 11% margins. Revenue has been contracting over the past three years (top line down 5%) in line with the aforementioned secular shifts. Cash to total liabilities is 0.22x. While the $300mm cash balance, healthy EBITDA margins, and good brand portfolio provide cushion, the revenue decline, secular shift away from corporate products, and elevated debt make it a tough sell.

Now to the merits. Its share price is approximately cyclical and is trading near 5-year lows in the past few months. The stock itself paying a 3% dividend at the current price of ~$54/share is not too shabby. Management has also shown willingness to make share repurchases – 2023 and 2024 saw approximately $1b of repurchases by the company, bolstering shareholders. However, management’s willingness to pay shareholders alone is not enough to outweigh the obvious shortfalls mentioned above – at the moment, it is simply too expensive. Should the price fall to the $20-30 range while maintaining this EBITDA and balance sheet profile, it might be a good fit. But the “might” is the reason it languishes on the watchlist.

Await full year 2025 results with bated breath.

Inverness Holdings has no position in SPB.