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Should Value Investors Buy Graphic Packaging (GPK) Stock?

Zacks Equity Research

Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.

Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.

Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.

One stock to keep an eye on is Graphic Packaging (GPK). GPK is currently sporting a Zacks Rank of #1 (Strong Buy), as well as a Value grade of A. The stock is trading with P/E ratio of 13.28 right now. For comparison, its industry sports an average P/E of 15.61. GPK's Forward P/E has been as high as 19.06 and as low as 10.84, with a median of 14.82, all within the past year.

Investors should also note that GPK holds a PEG ratio of 0.53. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. GPK's PEG compares to its industry's average PEG of 1.26. Over the last 12 months, GPK's PEG has been as high as 1.27 and as low as 0.43, with a median of 0.95.

Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. GPK has a P/S ratio of 0.65. This compares to its industry's average P/S of 1.03.

Finally, investors should note that GPK has a P/CF ratio of 6.89. This figure highlights a company's operating cash flow and can be used to find firms that are undervalued when considering their impressive cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 20.13. Within the past 12 months, GPK's P/CF has been as high as 7.59 and as low as 4.68, with a median of 6.67.

These are just a handful of the figures considered in Graphic Packaging's great Value grade. Still, they help show that the stock is likely being undervalued at the moment. Add this to the strength of its earnings outlook, and we can clearly see that GPK is an impressive value stock right now.

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Zacks Investment Research