Investors interested in stocks from the Containers - Paper and Packaging sector have probably already heard of Graphic Packaging (GPK) and Packaging Corp. (PKG). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Graphic Packaging and Packaging Corp. are sporting Zacks Ranks of #2 (Buy) and #5 (Strong Sell), respectively, right now. Investors should feel comfortable knowing that GPK likely has seen a stronger improvement to its earnings outlook than PKG has recently. However, value investors will care about much more than just this.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its current share price levels.
The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
GPK currently has a forward P/E ratio of 16.08, while PKG has a forward P/E of 16.44. We also note that GPK has a PEG ratio of 0.64. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. PKG currently has a PEG ratio of 3.29.
Another notable valuation metric for GPK is its P/B ratio of 2.27. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, PKG has a P/B of 3.19.
These are just a few of the metrics contributing to GPK's Value grade of B and PKG's Value grade of C.
GPK sticks out from PKG in both our Zacks Rank and Style Scores models, so value investors will likely feel that GPK is the better option right now.
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Graphic Packaging Holding Company (GPK) : Free Stock Analysis Report
Packaging Corporation of America (PKG) : Free Stock Analysis Report
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