Long-established in the Packaging & Containers industry, WestRock Co (WRK, Financial) has built a stellar reputation over the years. Recently, the company experienced a daily gain of 3.54%, alongside a three-month change of 5.96%. Despite these gains, the latest insights from the GF Score indicate potential challenges ahead. Key metrics such as financial strength, growth, and valuation have shown declines, suggesting that WestRock Co may not maintain its historical performance levels. This article delves into these critical factors to uncover the evolving narrative of WestRock Co.
What Is the GF Score?
The GF Score is a comprehensive ranking system developed by GuruFocus, assessing stocks across five key aspects of valuation. This system, which has been backtested from 2006 to 2021, correlates closely with long-term stock performance. Stocks with higher GF Scores typically yield better returns than those with lower scores. The GF Score ranges from 0 to 100, with 100 representing the highest potential for return.
- Financial strength rank: 5/10
- Profitability rank: 6/10
- Growth rank: 2/10
- GF Value rank: 3/10
- Momentum rank: 6/10
Based on these metrics, GuruFocus assigned WestRock Co a GF Score of 66 out of 100, signaling a cautious outlook on its future performance.
Understanding WestRock Co's Business
WestRock Co, with a market cap of $13.3 billion and annual sales of $19.46 billion, is a dominant player in the packaging industry. The company, formed from the merger of RockTenn and MeadWestvaco in 2015, is now the largest North American producer of solid bleached sulfate and the second-largest producer of containerboard. These materials are crucial for manufacturing shipping containers and other packaging products. Despite its significant market presence, recent financial and growth metrics suggest potential hurdles ahead.
Financial Strength and Challenges
WestRock Co's financial health raises some concerns. The company's interest coverage ratio of 1.88 is lower than 81.61% of its industry peers, indicating potential difficulties in managing interest expenses on its debt. Furthermore, its Altman Z-Score of 1.39 falls below the distress threshold, suggesting possible financial distress in the near future. Additionally, a low cash-to-debt ratio of 0.06 highlights challenges in debt management.
Growth Prospects and Predictability
WestRock Co's growth prospects appear limited, as evidenced by its low Growth rank. The company has seen a decline in EBITDA over the past five years, with a three-year growth rate of -36.2% and a five-year rate of -22.9%. These figures underscore potential profitability challenges. Additionally, its predictability rank of one star out of five adds to the uncertainty regarding its revenue and earnings consistency.
Conclusion
Considering WestRock Co's financial strength, profitability, and growth metrics, the GF Score highlights the firm's challenging position for potential underperformance. Investors seeking more robust investment opportunities can explore companies with stronger GF Scores using the GF Score Screen available to GuruFocus Premium members.
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.
