Quick Report on International Paper Company (IP)

It's been a great afternoon session for International Paper Company investors, who saw their shares rise 2.0% to a price of $34.48 per share. At these higher prices, is the company still fairly valued? If you are thinking about investing, make sure to check the company's fundamentals before making a decision.

The Market May Be Undervaluing International Paper Company's Assets and Equity:

International Paper Company produces renewable fiber-based packaging and pulp products in North America, Latin America, Europe, and North Africa. The company belongs to the Basic Materials sector, which has an average price to earnings (P/E) ratio of 10.03 and an average price to book (P/B) ratio of 2.08. In contrast, International Paper Company has a trailing 12 month P/E ratio of 8.5 and a P/B ratio of 1.42.

When we divideInternational Paper Company's P/E ratio by its expected five-year EPS growth rate, we obtain a PEG ratio of 0.82, which indicates that the market is undervaluing the company's projected growth (a PEG ratio of 1 indicates a fairly valued company). Your analysis of the stock shouldn't end here. Rather, a good PEG ratio should alert you that it may be worthwhile to take a closer look at the stock.

The Company Has a Highly Leveraged Balance Sheet and a Declining EPS Growth Trend:

2018-02-22 2019-02-20 2020-02-19 2021-02-19 2022-02-18 2023-02-17
Revenue (MM) $21,743 $23,306 $18,317 $17,565 $19,363 $21,161
Gross Margins 32.0% 33.0% 31.0% 30.0% 28.0% 28.0%
Operating Margins 8% 13% 10% 8% 8% 8%
Net Margins 10.0% 9.0% 7.0% 3.0% 9.0% 7.0%
Net Income (MM) $2,144 $2,012 $1,225 $482 $1,752 $1,504
Net Interest Expense (MM) -$572 -$536 -$499 -$446 -$337 -$325
Depreciation & Amort. (MM) -$1,423 -$1,328 -$1,306 -$1,287 -$1,210 -$1,040
Earnings Per Share $4.86 $4.6 $2.91 $1.15 $4.46 $3.83
EPS Growth n/a -5.35% -36.74% -60.48% 287.83% -14.13%
Diluted Shares (MM) 441 437 421 418 393 392
Free Cash Flow (MM) $2,989 $4,775 $4,868 $3,055 $1,929 $2,161
Capital Expenditures (MM) -$1,365 -$1,549 -$1,258 $8 $101 $13
Net Current Assets (MM) -$19,085 -$19,197 -$19,114 -$12,614 -$9,065 -$8,673
Long Term Debt (MM) $17,137 $16,313 $11,986 $10,390 $7,718 $7,205
Net Debt / EBITDA 5.03 3.81 5.2 5.35 2.38 2.56

International Paper Company has slimmer gross margins than its peers, declining EPS growth, and a highly leveraged balance sheet. International Paper Company has weak revenue growth and a flat capital expenditure trend, weak operating margings with a stable trend, and irregular cash flows. In addition, we note just enough current assets to cover current liabilities.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.