International Paper Co (IP, Financial) recently reported a daily loss of -2.4%, with a 3-month decline of -4.21%. Despite these figures, the company's Earnings Per Share (EPS) stand at $0.74. This leads us to the pivotal question: is the stock significantly undervalued? The following analysis delves into the valuation of International Paper Co (IP) to provide investors with a clearer picture.
Company Introduction
International Paper Co is a leading manufacturer of packaging products and cellulose fibers. With a commanding one-third share of the North American corrugated packaging market and operations extending to Brazil, Russia, India, and China, the company secures over three-fourths of its sales from North America. Catering to a diverse range of end markets, including industrial, consumer products, and manufacturing, International Paper Co's financials are a point of interest for investors. The stock currently trades at $32.58, with a market cap of $11.30 billion, which beckons the question of its alignment with the GF Value, an estimation of fair value.
Summarize GF Value
The GF Value is a proprietary measure, reflecting the intrinsic value of International Paper Co (IP, Financial) based on historical trading multiples, a GuruFocus adjustment factor, and anticipated business performance. This measure suggests that the stock could be significantly undervalued. The GF Value Line indicates the fair trading value of the stock, which, at the current price of $32.58 per share, suggests that International Paper Co's stock could promise a higher future return than its business growth alone might indicate.
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Financial Strength
A company's financial strength is critical to assess to sidestep the risk of permanent capital loss. International Paper Co's cash-to-debt ratio stands at 0.19, ranking below 67.3% of peers in the Packaging & Containers industry. This fair financial strength rating of 6 out of 10 showcases the company's stable fiscal footing.
Profitability and Growth
Consistent profitability is a beacon for investors, and International Paper Co has maintained profitability for the past decade. With a 12-month revenue of $19.40 billion and an operating margin of 6.9%, the company's profitability is ranked 7 out of 10, indicating a stable investment. Growth, a key valuation driver, has seen the company's 3-year average annual revenue growth rate at 7.9%, positioning it favorably within the industry.
ROIC vs. WACC
Comparing Return on Invested Capital (ROIC) to the Weighted Average Cost of Capital (WACC) is another method to gauge profitability. International Paper Co's ROIC of 4.87 is currently below its WACC of 8.85, suggesting the company must improve its capital efficiency to create more value for shareholders.
Conclusion
Overall, International Paper Co (IP, Financial) appears to be significantly undervalued. The company's fair financial condition and profitability, coupled with its competitive growth rates, make it a stock worth considering. To gain deeper insights into International Paper Co's financials, investors are encouraged to review the 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.
