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Is It Time To Consider Buying Graphic Packaging Holding Company (NYSE:GPK)?

Simply Wall St

Graphic Packaging Holding Company (NYSE:GPK), which is in the packaging business, and is based in United States, maintained its current share price over the past couple of month on the NYSE, with a relatively tight range of US$15.63 to US$16.86. However, does this price actually reflect the true value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Graphic Packaging Holding’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Graphic Packaging Holding

What's the opportunity in Graphic Packaging Holding?

The stock seems fairly valued at the moment according to my relative valuation model. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Graphic Packaging Holding’s ratio of 22.6x is trading slightly above its industry peers’ ratio of 20.16x, which means if you buy Graphic Packaging Holding today, you’d be paying a relatively reasonable price for it. And if you believe Graphic Packaging Holding should be trading in this range, then there isn’t really any room for the share price grow beyond what it’s currently trading. Although, there may be an opportunity to buy in the future. This is because Graphic Packaging Holding’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What does the future of Graphic Packaging Holding look like?

NYSE:GPK Past and Future Earnings, February 20th 2020

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by 63% over the next couple of years, the future seems bright for Graphic Packaging Holding. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? GPK’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at GPK? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping tabs on GPK, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic forecast is encouraging for GPK, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Graphic Packaging Holding. You can find everything you need to know about Graphic Packaging Holding in the latest infographic research report. If you are no longer interested in Graphic Packaging Holding, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.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.

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. Thank you for reading.