An Attractive Value to Benefit from Consumer Goods Volumes Recovery
Graphic Packaging (GPK) a long-time standout in its industry forming a big weekly bull flag with MACD now crossing back into a buy-signal.
GPK is a global leader in sustainable consumer packaging. It sees a $15B addressable market across Trays/Bowls, Cups/Containers, Multi-Packs, Paperboard Canisters and Strength Packaging.
GPK has the most exposure to Food and Beverage as well as a big Foodservices business.
GPK has a market cap of $8.6B and trades 9.9X Earnings and 7.6X EBITDA. GPK’s 2030 vision targets LSD annual sales growth, MSD annual EBITDA growth and HSD annual EPS growth. GPK expects $5B in cash flow to deploy over 2024-2030. GPK’s PE is in the 19th percentile of its 10-year range and EV/EBITDA at the 13th, so the stock is cheap even as profitability is in the 90th+ percentiles and Debt/EBITDA 3rd percentile. GPK has a diverse pipeline of innovation-based projects that will continue to enable low single-digit topline growth in 2025 and beyond. GPK has potential for better volumes as customers adjust commercial strategies, including those on promotions and net pricing.
Looking over the Q2 report, the company has seen continued strength in its European business and encouraging signs in the Americas, specifically the food business, which is its largest. Management explained that the outperformance in beverage was due to a combination of factors, including innovation, strong demand, and a hot market in North America.
Analysts have an average target of $33 and short interest has risen to 6% of the float from 4% in April. RayJay has a $35 target positive on the portfolio realignment on earnings growth and margins making it less cyclical to consumer demand.
