Sealed Air Corp (SEE): An Undervalued Gem in the Packaging Industry?
Despite a daily loss of 7.91% and a 3-month loss of 6.43%, Sealed Air Corp (NYSE:SEE) presents an intriguing case for value investors. With an Earnings Per Share (EPS) (EPS) of 2.77, the question arises: Is Sealed Air modestly undervalued? This comprehensive valuation analysis aims to answer that question and provide an insightful understanding of the company's financial health and prospects.
A Snapshot of Sealed Air Corp (NYSE:SEE)
Sealed Air Corp is a prominent player in the packaging industry, primarily focusing on food and product care. Its food packaging products, such as Cryovac, Darfresh, and OptiDure, are primarily aimed at meats. The product care segment includes Sealed Air's Bubble Wrap, Instapak, Jiffy mailers, and shrink film packaging systems that cater to industrial and e-commerce applications. The company currently trades at $40.6 per share, with a market cap of $5.9 billion. However, the GF Value estimates its fair value at $57.53, suggesting that Sealed Air might be undervalued.
Understanding the GF Value
The GF Value is a unique measure that estimates the intrinsic value of a stock. It's calculated based on three factors: historical multiples at which the stock has traded, a GuruFocus adjustment factor based on the company's past performance and growth, and future business performance estimates. The GF Value Line represents the fair value at which the stock should ideally be traded. If the stock price significantly deviates from the GF Value Line, it may indicate overvaluation or undervaluation, impacting its future returns.
Based on the GF Value calculation, Sealed Air (NYSE:SEE) seems to be modestly undervalued. With a current price of $40.6 per share and a market cap of $5.9 billion, it's believed that the stock's long-term return is likely to be higher than its business growth due to its relative undervaluation.
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Sealed Air's Financial Strength
Investing in companies with poor financial strength carries a higher risk of permanent capital loss. Therefore, it's essential to review a company's financial strength before buying its stock. Sealed Air's cash-to-debt ratio of 0.06 is worse than 84.95% of companies in the Packaging & Containers industry, indicating poor financial strength. The company's overall financial strength is ranked 4 out of 10 by GuruFocus.
Profitability and Growth of Sealed Air
Investing in profitable companies typically carries less risk. Sealed Air has been profitable for 10 out of the past 10 years, demonstrating consistent profitability. Over the past 12 months, the company had revenues of $5.6 billion and an EPS of $2.77. Its operating margin of 15.36% is better than 91.53% of companies in the Packaging & Containers industry, indicating strong profitability.
One of the most critical factors in company valuation is growth. The average annual revenue growth of Sealed Air is 7.4%, which ranks better than 54.26% of companies in the Packaging & Containers industry. The 3-year average EBITDA growth is 17.4%, which ranks better than 74.1% of companies in the same industry.
ROIC vs WACC
A comparison of a company's return on invested capital (ROIC) to the weighted average cost of capital (WACC) can provide insights into its profitability. Sealed Air's ROIC is 11.08, and its WACC is 8.08. When the ROIC is higher than the WACC, it implies the company is creating value for shareholders.
Conclusion
In summary, Sealed Air stock appears to be modestly undervalued. Despite the company's poor financial condition, its profitability is strong, and its growth ranks better than 74.1% of companies in the Packaging & Containers industry. For more detailed insights into Sealed Air's financials, check out its 30-Year Financials here.
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This article first appeared on GuruFocus.
