Today, we examine the stock of Sealed Air Corp (SEE, Financial), which has experienced a daily loss of 2.57% and a 3-month loss of 17.9%. With an Earnings Per Share (EPS) of 2.68, the question arises: is Sealed Air significantly undervalued? In this analysis, we delve into the company's valuation, financial strength, profitability, and growth. We invite you to join us in this comprehensive exploration.
Company Overview
Sealed Air Corp (SEE, Financial) is a renowned player in the packaging industry, known for its food packaging products like Cryovac, Darfresh, and OptiDure, primarily aimed at meats. Its product care segment includes Bubble Wrap, Instapak, Jiffy mailers, and shrink film packaging systems catering to industrial and e-commerce applications. With a current stock price of $34.46 and a market cap of $5 billion, the company's valuation is a key point of interest.
Understanding GF Value
The GF Value is a unique measure of a stock's intrinsic value, calculated based on historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. The GF Value Line provides an overview of the fair trading value for a stock. If the stock price is significantly above or below the GF Value Line, it is respectively overvalued or undervalued.
According to our calculations, Sealed Air (SEE, Financial) is significantly undervalued. This implies that the long-term return of its stock is likely to be much higher than its business growth, presenting a potentially attractive opportunity for investors.
Financial Strength
Investors should always assess a company's financial strength to avoid the risk of permanent capital loss. Key indicators of financial strength include the cash-to-debt ratio and interest coverage. Sealed Air's cash-to-debt ratio of 0.06 ranks worse than 84.68% of companies in the packaging industry, indicating poor financial strength.
Profitability and Growth
Investing in profitable companies is generally less risky, especially those with consistent profitability over the long term. Sealed Air has been profitable over the past 10 years, with a revenue of $5.50 billion and an operating margin of 15.23%, ranking better than 91.26% of companies in the packaging industry.
Another crucial factor in valuation is growth. Sealed Air's 3-year average revenue growth rate is better than 53.98% of companies in the packaging industry, and its 3-year average EBITDA growth rate is 17.4%, ranking better than 73.87% of companies in the same industry.
ROIC vs WACC
Comparing a company's Return on Invested Capital (ROIC) to the Weighted Average Cost of Capital (WACC) can also provide insights into its profitability. For the past 12 months, Sealed Air's ROIC is 10.03, and its cost of capital is 7.76, indicating the company is creating value for shareholders.
Conclusion
In conclusion, Sealed Air Corp (SEE, Financial) appears to be significantly undervalued. Despite its poor financial condition, it has strong profitability and growth rates better than 73.87% of companies in the packaging industry. To learn more about Sealed Air stock, you can check out its 30-Year Financials here.
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