Sealed Air (SEE): A Hidden Gem or a Mirage? An In-Depth Analysis of Its Market Value
Sealed Air Corp (NYSE:SEE) has recently witnessed a daily gain of 3.95% and an Earnings Per Share (EPS) (EPS) of 2.68, despite a 3-month loss of -18.88%. These fluctuations raise a crucial question: is Sealed Air's stock significantly undervalued? In this article, we'll delve into the company's valuation, financial strength, profitability, and growth to provide a comprehensive answer.
A Closer Look at Sealed Air Corp
Sealed Air Corp is a leading company in the packaging industry, known for its innovative products such as Cryovac, Darfresh, and OptiDure for food packaging, and Bubble Wrap, Instapak, Jiffy mailers, and shrink film packaging systems for industrial and e-commerce applications. Despite its current stock price of $32.65, the company's fair value, known as the GF Value, is estimated at $55.56. This discrepancy suggests that Sealed Air's stock might be significantly undervalued.
Understanding the GF Value
The GF Value is a unique metric that represents the intrinsic value of a stock. It's calculated based on historical multiples that the stock has traded at, an internal adjustment factor from GuruFocus based on the company's past returns and growth, and estimates of future business performance. The GF Value Line, displayed on the summary page, provides an overview of the fair value at which the stock should ideally be traded.
According to the GF Value, Sealed Air Corp (NYSE:SEE) is significantly undervalued. This conclusion is based on the fact that the company's stock price is considerably below the GF Value Line, indicating that its future returns are likely to be higher. With Sealed Air's stock priced at $32.65 per share, it's estimated to be a significantly undervalued asset.
Because Sealed Air is significantly undervalued, the long-term return of its stock is likely to be much higher than its business growth.
Assessing Sealed Air's Financial Strength
Investing in companies with low financial strength could result in permanent capital loss. Therefore, it's crucial to carefully review a company's financial strength before investing. When considering the cash-to-debt ratio and interest coverage, Sealed Air's cash-to-debt ratio of 0.06 ranks worse than 85.33% of 375 companies in the Packaging & Containers industry. Based on this, GuruFocus ranks Sealed Air's financial strength as 4 out of 10, suggesting a poor balance sheet.
Profitability and Growth of Sealed Air
Investing in profitable companies carries less risk, especially those that have demonstrated consistent profitability over the long term. Sealed Air has been profitable for 10 years over the past 10 years. The company's operating margin of 15.23% is better than 91.08% of 381 companies in the Packaging & Containers industry, indicating strong profitability.
Growth is an essential factor in the valuation of a company. The 3-year average annual revenue growth rate of Sealed Air is 7.4%, which ranks better than 52.07% of 363 companies in the Packaging & Containers industry. The 3-year average EBITDA growth rate is 17.4%, which ranks better than 74.28% of 346 companies in the Packaging & Containers industry, indicating promising growth.
ROIC vs WACC
Evaluating a company's profitability can also involve comparing its return on invested capital (ROIC) to its weighted average cost of capital (WACC). If the ROIC exceeds the WACC, the company is likely creating value for its shareholders. Over the past 12 months, Sealed Air's ROIC was 10.03, while its WACC was 7.76, suggesting potential value creation.
Conclusion
In conclusion, Sealed Air Corp (NYSE:SEE) stock is estimated to be significantly undervalued. Despite its poor financial condition, the company's profitability is strong, and its growth ranks better than 74.28% of 346 companies in the Packaging & Containers industry. To learn more about Sealed Air Corp, you can check out its 30-Year Financials here.
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This article first appeared on GuruFocus.
