At US$50.30, Is International Paper Company (NYSE:IP) Worth Looking At Closely?
Today we’re going to take a look at the well-established International Paper Company (NYSE:IP). The company’s stock saw significant share price volatility over the past couple of months on the NYSE, rising to the highs of $54.58 and falling to the lows of $49.15. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether International Paper’s current trading price of $50.3 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at International Paper’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
View our latest analysis for International Paper
What is International Paper worth?
According to my valuation model, International Paper seems to be fairly priced at around 14.65% above my intrinsic value, which means if you buy International Paper today, you’d be paying a relatively fair price for it. And if you believe that the stock is really worth $43.87, 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 International Paper’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 kind of growth will International Paper generate?
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. However, with a negative profit growth of -11% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for International Paper. This certainty tips the risk-return scale towards higher risk.
What this means for you:
Are you a shareholder? IP seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on IP for a while, now may not be the most optimal time to buy, given it is trading around its fair value. The stock appears to be trading at fair value, which means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on IP should the price fluctuate below its true value.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on International Paper. You can find everything you need to know about International Paper in the latest infographic research report. If you are no longer interested in International Paper, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
