Packaging Corporation of America (NYSE:PKG) is a company with exceptional fundamental characteristics. Upon building up an investment case for a stock, we should look at various aspects. In the case of PKG, it is a financially-robust company with an impressive track record of performance, trading at a great value. Below, I've touched on some key aspects you should know on a high level. For those interested in digging a bit deeper into my commentary, read the full report on Packaging of America here.
Solid track record, good value and pays a dividend
PKG has a strong track record of performance. In the previous year, PKG delivered an impressive double-digit return of 28%. Unsurprisingly, PKG surpassed the Packaging industry return of 16%, which gives us more confidence of the company's capacity to drive earnings going forward. PKG is financially robust, with ample cash on hand and short-term investments to meet upcoming liabilities. This indicates that PKG has sufficient cash flows and proper cash management in place, which is a crucial insight into the health of the company. PKG seems to have put its debt to good use, generating operating cash levels of 0.48x total debt in the most recent year. This is also a good indication as to whether debt is properly covered by the company’s cash flows.
PKG's share price is trading at below its true value, meaning that the market sentiment for the stock is currently bearish. Investors have the opportunity to buy into the stock to reap capital gains, if PKG's projected earnings trajectory does follow analyst consensus growth, which determines my intrinsic value of the company. Also, relative to the rest of its peers with similar levels of earnings, PKG's share price is trading below the group's average. This further reaffirms that PKG is potentially undervalued.
For Packaging of America, there are three pertinent factors you should further research:
- Future Outlook: What are well-informed industry analysts predicting for PKG’s future growth? Take a look at our free research report of analyst consensus for PKG’s outlook.
- Dividend Income vs Capital Gains: Does PKG return gains to shareholders through reinvesting in itself and growing earnings, or redistribute a decent portion of earnings as dividends? Our historical dividend yield visualization quickly tells you what your can expect from PKG as an investment.
- Other Attractive Alternatives : Are there other well-rounded stocks you could be holding instead of PKG? Explore our interactive list of stocks with large potential to get an idea of what else is out there you may be missing!
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.