WestRock Co (WRK, Financial) has recently shown a daily gain of 2.59% and a 3-month gain of 13.22%. Despite these positive trends, the company reports a Loss Per Share of $5.54. Investors are often faced with the question: is the stock modestly undervalued? This article delves into the valuation analysis of WestRock Co (WRK) to provide an answer, encouraging readers to explore the following in-depth assessment.
Company Introduction
WestRock Co (WRK, Financial) is a prominent player in the packaging industry, emerging as the largest North American producer of solid bleached sulfate post the merger of RockTenn and MeadWestvaco in 2015. As the second-largest producer of containerboard, utilized in shipping containers, WestRock Co's influence on the market is substantial. With a current stock price of $38.4 and a GF Value of $48.65, indicating an estimation of fair value, a comparison between these figures is critical for understanding the company's valuation status.
Summarize GF Value
The GF Value is an exclusive method to determine the intrinsic value of a stock. It incorporates historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line, a visual representation on our summary page, suggests the fair trading value of the stock. When the stock price gravitates significantly above this line, it may be overvalued, implying a potentially poorer future return. Conversely, if it falls notably below, the stock is likely to yield a higher future return.
For WestRock Co (WRK, Financial), the stock seems modestly undervalued with its current price of $38.4 against a market cap of $9.80 billion. This valuation suggests that the long-term return of WestRock Co's stock could surpass its business growth.
Financial Strength
Assessing a company's financial strength is crucial before investing. Companies with weak financials carry a higher risk of permanent loss. WestRock Co's cash-to-debt ratio of 0.04 places it in a precarious position within the Packaging & Containers industry, ranking lower than 88.74% of its peers. With an overall financial strength score of 4 out of 10, WestRock Co's financial health is considered poor. The following chart illustrates the company's debt and cash flow over recent years.
Profitability and Growth
Investing in profitable companies generally carries less risk, particularly those with a history of consistent profitability. WestRock Co has managed to remain profitable for 8 out of the past 10 years. With a revenue of $20.70 billion and a Loss Per Share of $5.54 over the past 12 months, its operating margin stands at 6.26%, which is relatively robust within its industry. The company's profitability is deemed fair by GuruFocus.
Growth is another vital aspect of valuation. Companies that grow faster tend to generate more shareholder value, particularly when the growth is profitable. WestRock Co's average annual revenue growth rate is 4.8%, which is lower than 61.92% of its industry counterparts. The 3-year average EBITDA growth rate is -1%, ranking below 65.04% of companies in the same sector.
ROIC vs WACC
Comparing a company's Return on Invested Capital (ROIC) with its Weighted Average Cost of Capital (WACC) can provide insights into its profitability. Ideally, ROIC should exceed WACC. WestRock Co's ROIC is 5.07, which is below its WACC of 8.4, indicating that the company may not be generating sufficient returns on its investments. The chart below shows the historical comparison of WestRock Co's ROIC versus WACC.
Conclusion
Overall, WestRock Co (WRK, Financial) stock appears to be modestly undervalued. The company's financial condition is poor, and its profitability is fair, with growth ranking below a significant portion of its industry. To gain a deeper understanding of WestRock Co stock, interested parties can review its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
