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Here's Why Packaging Corp (PKG) Stock is an Attractive Pick
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Robust packaging demand for essential products in response to the coronavirus pandemic is aiding Packaging Corporation of America (PKG - Free Report) . Moreover, rising online sales activity is fueling e-commerce demand as customers are preferring to stay indoors, in turn boosting demand for the company’s packaging solutions. These factors position the company as a promising investment option at the moment.
The company currently carries a Zacks Rank #2 (Buy) and has a VGM Score of B. Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2, offer the best investment opportunities. You can see the complete list of today’s Zacks #1 Rank stocks here.
Let's delve deeper into the factors that make the Packaging Corporation stock a compelling investment option at the moment.
Impressive Price Performance
The stock has gained 42.6% over the past year, outperforming the industry’s growth of 36.5%.
Image Source: Zacks Investment Research
Valuation is Inexpensive
The trailing 12-month EV/EBITDA ratio is 11.0 for the company, while the industry's average trailing 12-month EV/EBITDA ratio is 23.2.
Superior Return on Assets
Packaging Corporation currently has a Return on Assets (ROA) of 7.8%, higher than the industry’s 5.3%. An above-average ROA denotes that the company is generating earnings by effectively managing its assets.
Positive Earnings Surprise Trend
The company has a trailing four-quarter average earnings surprise of 9.3%.
Upbeat Growth Projections
The Zacks Consensus Estimate for 2021 earnings per share is currently pegged at $7.46, indicating growth of 29% from the prior year. The same for 2022 is pinned at $8.44, suggesting a year-over-year improvement of 13.1%. The stock has an estimated long-term earnings growth rate of 5%.
Other Growth Drivers
Packaging Corporation has been witnessing robust demand in the Packaging segment amid the global health crisis. Notably, this segment generates around 89% of the company’s revenues. The segment continues to benefit from the elevated demand for meat, fruit and vegetables, processed food, beverages, medicine, and other consumer products as packaging is an essential for the distribution of these products. Also, the company’s containerboard shipment volume set new all-time quarterly records in first-quarter 2021. It will continue to implement its proposed price-rise actions across the Packaging segment in response to cost inflation.
The company will continue benefiting from increased e-commerce sales as customers are staying indoors amid the pandemic. This is driving corrugated packaging demand since the products need to be delivered in the best conditions to the consumer.
Packaging Corporation ended the March-end quarter with $983 million of cash on hand or $1.1 billion, including marketable securities. The company’s liquidity as of Mar 31, 2021 was close to $1.5 billion. This positions the company well to navigate through the turbulent times. It maintains a balanced approach toward capital allocation in order to boost growth as well as maximize returns for shareholders. The company projects total capital expenditures between $650 million and $675 million for the current year.
Other Stocks to Consider
A few other top-ranked stocks in the Industrial Products sector are Greif, Inc. (GEF - Free Report) , Lindsay Corporation (LNN - Free Report) and Pentair plc (PNR - Free Report) . All of these stocks sport a Zacks Rank #1, at present.
Greif has an anticipated earnings growth rate of 47.2% for fiscal 2021. The company’s shares have gained around 29.3%, year to date.
Lindsay has an estimated earnings growth rate of 1% for the ongoing fiscal year. Year to date, the company’s shares have rallied 29.1%.
Pentair has a projected earnings growth rate of 26% for the current year. The stock has appreciated around 29%, so far this year.
Zacks Names “Single Best Pick to Double”
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
You know this company from its past glory days, but few would expect that it’s poised for a monster turnaround. Fresh from a successful repositioning and flush with A-list celeb endorsements, it could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in a little more than 9 months and Nvidia which boomed +175.9% in one year.
Image: Bigstock
Here's Why Packaging Corp (PKG) Stock is an Attractive Pick
Robust packaging demand for essential products in response to the coronavirus pandemic is aiding Packaging Corporation of America (PKG - Free Report) . Moreover, rising online sales activity is fueling e-commerce demand as customers are preferring to stay indoors, in turn boosting demand for the company’s packaging solutions. These factors position the company as a promising investment option at the moment.
The company currently carries a Zacks Rank #2 (Buy) and has a VGM Score of B. Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2, offer the best investment opportunities. You can see the complete list of today’s Zacks #1 Rank stocks here.
Let's delve deeper into the factors that make the Packaging Corporation stock a compelling investment option at the moment.
Impressive Price Performance
The stock has gained 42.6% over the past year, outperforming the industry’s growth of 36.5%.
Valuation is Inexpensive
The trailing 12-month EV/EBITDA ratio is 11.0 for the company, while the industry's average trailing 12-month EV/EBITDA ratio is 23.2.
Superior Return on Assets
Packaging Corporation currently has a Return on Assets (ROA) of 7.8%, higher than the industry’s 5.3%. An above-average ROA denotes that the company is generating earnings by effectively managing its assets.
Positive Earnings Surprise Trend
The company has a trailing four-quarter average earnings surprise of 9.3%.
Upbeat Growth Projections
The Zacks Consensus Estimate for 2021 earnings per share is currently pegged at $7.46, indicating growth of 29% from the prior year. The same for 2022 is pinned at $8.44, suggesting a year-over-year improvement of 13.1%. The stock has an estimated long-term earnings growth rate of 5%.
Other Growth Drivers
Packaging Corporation has been witnessing robust demand in the Packaging segment amid the global health crisis. Notably, this segment generates around 89% of the company’s revenues. The segment continues to benefit from the elevated demand for meat, fruit and vegetables, processed food, beverages, medicine, and other consumer products as packaging is an essential for the distribution of these products. Also, the company’s containerboard shipment volume set new all-time quarterly records in first-quarter 2021. It will continue to implement its proposed price-rise actions across the Packaging segment in response to cost inflation.
The company will continue benefiting from increased e-commerce sales as customers are staying indoors amid the pandemic. This is driving corrugated packaging demand since the products need to be delivered in the best conditions to the consumer.
Packaging Corporation ended the March-end quarter with $983 million of cash on hand or $1.1 billion, including marketable securities. The company’s liquidity as of Mar 31, 2021 was close to $1.5 billion. This positions the company well to navigate through the turbulent times. It maintains a balanced approach toward capital allocation in order to boost growth as well as maximize returns for shareholders. The company projects total capital expenditures between $650 million and $675 million for the current year.
Other Stocks to Consider
A few other top-ranked stocks in the Industrial Products sector are Greif, Inc. (GEF - Free Report) , Lindsay Corporation (LNN - Free Report) and Pentair plc (PNR - Free Report) . All of these stocks sport a Zacks Rank #1, at present.
Greif has an anticipated earnings growth rate of 47.2% for fiscal 2021. The company’s shares have gained around 29.3%, year to date.
Lindsay has an estimated earnings growth rate of 1% for the ongoing fiscal year. Year to date, the company’s shares have rallied 29.1%.
Pentair has a projected earnings growth rate of 26% for the current year. The stock has appreciated around 29%, so far this year.
Zacks Names “Single Best Pick to Double”
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
You know this company from its past glory days, but few would expect that it’s poised for a monster turnaround. Fresh from a successful repositioning and flush with A-list celeb endorsements, it could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in a little more than 9 months and Nvidia which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>