Amidst the daily fluctuations of the stock market, WestRock Co (WRK, Financial) recently experienced a notable daily gain of 4.4%, with a three-month gain of 23.35%. However, the company also reported a Loss Per Share of $6.45. These contrasting figures raise an important question: Is WestRock Co (WRK) modestly undervalued? To answer this, we delve into a comprehensive valuation analysis that may reveal hidden insights into the stock's true worth.
Company Introduction
WestRock Co, a leader in corrugated and consumer packaging, emerged as a dominant force after the merger of RockTenn and MeadWestvaco in 2015. It stands as the largest North American producer of solid bleached sulfate and the second-largest producer of containerboard. With a current stock price of $40.1 and a market cap of $10.60 billion, WestRock Co's valuation compared to its GF Value of $48.27 suggests that the stock may be modestly undervalued. This discrepancy offers a gateway to a deeper evaluation of the company's intrinsic value.
Summarize GF Value
The GF Value is a unique indicator of a stock's intrinsic value, incorporating historical trading multiples, a GuruFocus adjustment factor for past performance, and future business projections. The GF Value Line serves as a benchmark for the stock's ideal trading value. When a stock's price significantly exceeds this line, it may be overvalued, suggesting a potential decline in future returns. Conversely, a price below the GF Value Line implies an undervalued stock with prospects for higher returns. Currently, WestRock Co's price of $40.1 per share indicates that the stock might be modestly undervalued, hinting at a potentially favorable long-term investment opportunity.
Financial Strength
Investing in companies with robust financial strength mitigates the risk of capital loss. A thorough examination of WestRock Co's financials, including its cash-to-debt ratio of 0.05, reveals a financial position that is weaker than 89.3% of its industry peers. Despite this, WestRock Co's overall financial strength has been rated a fair 5 out of 10 by GuruFocus, indicating a stable financial footing.
Profitability and Growth
Profitable companies, especially those with a track record of consistent performance, generally pose lower investment risks. WestRock Co has been profitable for 7 out of the past 10 years, with a revenue of $20.30 billion in the last twelve months. Despite a Loss Per Share of $6.45, the company's operating margin of 6.06% is competitive within the industry. However, growth remains a concern as WestRock Co's 3-year average annual revenue growth rate of 5.4% falls short against industry counterparts.
ROIC vs WACC
Comparing a company's Return on Invested Capital (ROIC) to its Weighted Average Cost of Capital (WACC) provides insight into its value creation efficiency. WestRock Co's ROIC of 4.57 is currently below its WACC of 8.43, suggesting that the company may not be generating sufficient returns on its investments.
Conclusion
After a thorough analysis, WestRock Co (WRK, Financial) appears to be modestly undervalued. The company maintains a fair financial condition and profitability, yet its growth prospects are less promising compared to industry standards. For investors seeking a deeper understanding of WestRock Co's financial health, detailed 30-Year Financials are available for review.
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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.
