A strong performer from today's afternoon trading session is International Paper, whose shares rose 1.6% to $48.7 per share. For those of you thinking about investing in the stock, here is a brief value analysis of the stock using the company's basic fundamental ratios.
a Lower P/B Ratio Than Its Sector Average but Priced at a Premium:
International Paper Company produces and sells 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 23.66 and an average price to book (P/B) ratio of 2.69. In contrast, International Paper has a trailing 12 month P/E ratio of 37.2 and a P/B ratio of 1.97.
International Paper's PEG ratio is 1.68, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.
The Company's Revenues Are Declining:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (M) | $23,306 | $18,317 | $17,565 | $19,363 | $21,161 | $18,916 |
| Operating Margins | 8% | 5% | 2% | 5% | 7% | 2% |
| Net Margins | 9% | 7% | 3% | 9% | 7% | 2% |
| Net Income (M) | $2,012 | $1,220 | $482 | $1,752 | $1,504 | $288 |
| Net Interest Expense (M) | -$536 | -$499 | -$446 | -$337 | -$325 | -$231 |
| Depreciation & Amort. (M) | $1,328 | $1,072 | $1,091 | $1,097 | $1,040 | $1,432 |
| Diluted Shares (M) | 414 | 399 | 396 | 392 | 367 | 349 |
| Earnings Per Share | $4.85 | $3.07 | $1.22 | $4.47 | $4.1 | $0.82 |
| EPS Growth | n/a | -36.7% | -60.26% | 266.39% | -8.28% | -80.0% |
| Avg. Price | $39.58 | $34.76 | $32.74 | $48.32 | $43.4 | $48.7 |
| P/E Ratio | 8.06 | 11.21 | 26.62 | 10.74 | 10.48 | 58.67 |
| Free Cash Flow (M) | $1,654 | $2,473 | $2,400 | $1,550 | $1,243 | $692 |
| CAPEX (M) | $1,572 | $1,137 | $663 | $480 | $931 | $1,141 |
| EV / EBITDA | 8.49 | 11.62 | 14.3 | 10.72 | 7.83 | 11.84 |
| Total Debt (M) | $10,654 | $9,765 | $8,068 | $5,579 | $5,579 | $5,593 |
| Net Debt / EBITDA | 3.24 | 4.64 | 5.26 | 2.04 | 1.87 | 2.47 |
| Current Ratio | 1.49 | 0.77 | 1.36 | 1.71 | 1.35 | 1.67 |
International Paper's financial statements include several red flags such as declining revenues and decreasing reinvestment in the business, weak operating margins with a negative growth trend, and declining EPS growth. Additionally, the firm has positive cash flows. On the other hand, the company benefits from a decent current ratio of 1.67 and healthy leverage levels.
