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Packaging Corp Of America Valuation

3/5/2016 Current share price: $52.69

Packaging Corporation of America is a manufacturer of corrugated case material and corrugated packaging material. The Company operates eight mills and has 99 manufacturing plants. The Company has operations in the United States, Europe, Mexico, and Canada. The Company operates 3 branches: Packaging, Paper, and Corporate. The packaging branch produces corrugated shipping products.  Its Paper segment makes paper. The Corporate division includes support staff services.

The simplest valuation is to compare Analyst Target to the Current Price.  The analyst target is 20% above the current price.  This suggests Considerable Upside Potential remaining.

Graham Value
The next simplest measures are Graham valuations.  4 variations are used using different time tables for calculating EPS and EPS growth.  These numbers reflect the impressive growth rates that PKG has had over the last ten years.  Leverage has nearly doubled over that time so to use this methodology accurately the numbers would have to be corrected for the increased leverage.

Relative Value
Relative valuations are based upon historic ratio values.  Buying at less than the historic values represent a good value.  Based on historic multiples PKG is in the appropriate price range. Key ratios range from saying the Stock is between 1% and 28% undervalued.

Intrinsic Value
Intrinsic valuations include discounted cash flow (DCF), dividend discount Model (DDM), and Earnings Power 
Value (EPV).  The DCF model values the PKG at $59.91, suggesting considerable Upside Potential.  EPV values PKG at $48.42 implying that the stock is slightly over bought based on the current share price.  The dividend growth model, DDM, values the PKG at $27.38 which says the the stock should not be bought for dividend growth investors near the current price.  

Technical Indicators
Simple Moving Average
PKG’s 13 day simple moving average is rising and it is currently trading above it.  Both of these are signs of a bullish trend.  
The MACD is above the signal line which is bullish.  The value is below 0 which suggests bearish influence.
On Balance Volume
The slope of the OBV is positive, suggesting buying interest.

Packaging Corp Of America is currently below its value based on most simple models.  The suggest that , upside Potential outweighs downside potential.  This stock passes the initial screening process and is a good candidate for in depth research to determine if it is buy worthy.

Technical indicators show that the stock has been in a bullish trend recently running it up from a 52 week low.  The stock could be traded based upon current bullish moment and an intrinsic value floor near the current share price.  

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

This website expresses my own opinion.   I am not a financial advisor.  All opinions, research, analyses, and other information provided on this website are provided as general market commentary and do not constitute investment advice.

This post first appeared on Simple Stock Valuation, please read the originial post: here

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Packaging Corp Of America Valuation


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