Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 3 stocks made the list for top value stocks in the Paper Products industry. Those looking for value stocks to add to their portfolio may want to use this list as a starting point for further investment research.

Why Focus on Undervalued Paper Products Stocks?

Value investors seek to buy stocks at a discount to their intrinsic value. Long-term returns show that such strategies are advantageous. Value stocks, as a group, tend to outperform growth stocks over extended periods of time. Typically, value investors perform financial analysis of numerous metrics, don’t follow the herd and are long-term investors.

AAII’s A+ Investor Value Grade is derived from a stock’s Value Score. The Value Score is the percentile rank of the average of the percentile ranks of the price-to-sales ratio, price-earnings ratio, enterprise-value-to-EBITDA (EV/EBITDA) ratio, shareholder yield, price-to-book-value ratio and price-to-free-cash-flow ratio. The score is variable, meaning it can consider all six ratios or, should any of the six ratios not be valid, the remaining ratios that are valid. To be assigned a Value Score, stocks must have a valid (non-null) ratio and corresponding ranking for at least two of the six valuation ratios.

What Goes Into AAII’s Value Grade?

Stock evaluation requires access to huge amounts of data as well as the knowledge and time to sift through it all, make sense of financial ratios, read income statements and analyze recent stock movement. AAII created A+ Investor, a robust data suite that condenses data research in an actionable and customizable way suitable for investors of all knowledge levels, to help investors with that task.

AAII’s proprietary stock grades come with A+ Investor. These offer intuitive A–F grades for more than just value. It is possible for a stock to appear cheap based on one valuation metric but appear expensive on another. It is also possible for one valuation ratio to be associated with outperforming stocks during certain periods of time but not others. Some stocks may even have null values for certain metrics like the price-earnings ratio or the price-to-book ratio but not others. An example of this would be a company with losses instead of profits or a negative book value because of heavy borrowing. Negative earnings or book value result in non-meaningful ratios that are left blank or null.

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3 Undervalued Paper Products Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 3 undervalued stocks in the Paper Products industry for Friday, May 03, 2024. Let’s take a closer look at their individual scores to see how they measure up against each other and the Paper Products industry median.

The Value Grade is assigned based on how each stock’s composite valuation compares to all other stocks.

The process for assigning grades starts with each variable for a given stock. The percentile rankings for all valid ratios that a stock has are calculated. So, for instance, a stock could have a price-to-book ranking in the 43rd percentile, a price-earnings ranking in the 67th percentile, a price-to-sales ranking in the 23rd percentile, etc. Then, those rankings are averaged for each stock. (A minimum of two valid variables are required, though all six will be used if available.)

Once the average of the individual variables is calculated, that average is ranked against all stocks. Put another way, each stock’s composite valuation is compared to all other stocks. These ranks are then sorted into quintiles from the cheapest 20% (a grade of A) to the most expensive 20% (a grade of F).

As always, we recommend that you conduct proper due diligence and research before investing in any security. We also suggest that investors utilize numerous grades, not just value, when it comes to deciding whether a company is a good fit for their allocation needs.

Clearwater Paper Corp’s Value Grade

Value Grade:

Clearwater Paper Corporation is a manufacturer and supplier of bleached paperboard and consumer and parent roll tissue. The Company operates through two segments: Pulp and Paperboard and Consumer Products. The Pulp and Paperboard segment markets and manufactures bleached paperboard for the high-end segment of the packaging industry and is a producer of Solid Bleached Sulfate (SBS) paperboard. The Pulp and Paperboard segment produces hardwood and softwood pulp, which is primarily used as the basis for its paperboard products or transferred to its Consumer Products segment. The Consumer Products segment sells and produces a complete line of at-home tissue products. It supplies bleached paperboard to quality-conscious printers and packaging converters, and offer services that include custom sheeting, slitting and cutting. It also supplies private branded tissue to retailers, including grocery, clubs, mass merchants and discount stores.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Clearwater Paper Corp has a Value Score of 96, which is considered to be undervalued.

When you look at Clearwater Paper Corp’s price-to-sales ratio at 0.36 compared to the industry median at 0.32, this company has a higher price relative to revenue compared to its peers. This could make Clearwater Paper Corp’s stock less attractive for value investors.

Clearwater Paper Corp’s price-earnings ratio is 7.54 compared to the industry median at 9.25. This means it has a lower share price relative to earnings compared to its peers. This could make Clearwater Paper Corp more attractive for value investors.

Now, let’s assess Clearwater Paper Corp’s EV/EBITDA ratio, also known as enterprise multiple. At 4.1, when compared to the industry median of 4.4, the company may be considered undervalued in relation to its peers. Value investors could use the enterprise multiple to identify stocks that are considered overvalued or undervalued relative to their industry.

Shareholder yield is the sum of a stock’s dividend yield (paid over previous 12 months minus special dividends) and the percentage of net share buybacks over the previous 12 months. Clearwater Paper Corp’s shareholder yield is lower than its industry median ratio of 1.85%. Value investors may look for an attractive shareholder yield because it can be a powerful tool for identifying if the company has a good management team.

As one of the most common value metrics, the price-to-book ratio evaluates a company’s current market price relative to its book value. Clearwater Paper Corp’s price-to-book ratio is higher than its industry median ratio of 0.89. This could make Clearwater Paper Corp less attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Clearwater Paper Corp’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Clearwater Paper Corp’s price-to-free-cash-flow ratio is lower than its industry median ratio of 5.60. This could make Clearwater Paper Corp more attractive because the lower P/FCF ratio indicates that Clearwater Paper Corp is undervalued. The P/FCF ratio metric can also be viewed over a long-term time frame to see if the company's cash flow to share price value is generally improving or worsening.

Glatfelter Corp’s Value Grade

Value Grade:

Glatfelter Corporation is a global supplier of engineered materials. The Company offers solutions across tea and single-serve coffee filtration, personal hygiene, as well as in many diverse packaging, home improvement and industrial applications. The Company operates through three segments: Airlaid Materials, Composite Fibers and Spunlace. Its Airlaid Materials segment is engaged in the sales of airlaid nonwoven fabric-like materials used in feminine hygiene products, adult incontinence products, tabletop, specialty wipes, and other airlaid applications. Its Composite Fibers segment is engaged in the sales of single-serve tea and coffee filtration papers, wallcovering base materials, composite laminate papers, technical specialties including substrates for electrical applications, and metallized products. Its Spunlace segment is engaged in the sales of quality spunlace nonwovens for critical cleaning, high-performance materials, personal care, hygiene, and medical applications.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Glatfelter Corp has a Value Score of 86, which is considered to be undervalued.

Glatfelter Corp’s price-to-book ratio is higher than its peers. This could make Glatfelter Corp less attractive for value investors when compared to the industry median at 0.89.

You can read more about Glatfelter Corp’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Sylvamo Corp’s Value Grade

Value Grade:

Sylvamo Corporation is an uncoated papers company. The Company’s segments include Europe, Latin America and North America. Europe segment produces a portfolio of uncoated freesheet papers for various uses and applications, and market pulp. The segment operates two integrated mills in the region, one in Saillat, France and one in Nymolla, Sweden. Latin American segment’s operations is focused on uncoated freesheet paper, as well as market pulp through the ownership or management of approximately 250,000 acres of forestlands in Brazil and consists of three mills: two integrated mills in the State of Sao Paulo and one non-integrated mill in Mato Grosso do Sul. The North American segment’s paper business manufactures uncoated freesheet papers at its mills in Eastover, South Carolina and Ticonderoga, New York and has offtake agreements to purchase the uncoated papers produced by International Paper’s Riverdale and Georgetown mills in Selma, Alabama and Georgetown, South Carolina.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Sylvamo Corp has a Value Score of 86, which is considered to be undervalued.

Sylvamo Corp’s price-earnings ratio is 11.0 compared to the industry median at 9.2. This means that it has a higher price relative to its earnings compared to its peers. This makes Sylvamo Corp less attractive for value investors.

Sylvamo Corp’s price-to-book ratio is lower than its peers. This could make Sylvamo Corp more attractive for value investors when compared to the industry median at 0.89.

You can read more about Sylvamo Corp’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Other Paper Products Stock Grades

Value is just one of the five Stock Grades included in our A+ Investor service. AAII members can see the top-graded stocks—those with grades of A or B for value, growth, momentum, earnings estimate revisions and quality—on the A+ Stock Grades Screener.

Also, if you want full access to all of AAII’s premium services, you can subscribe to one convenient bundled plan called AAII Platinum where you can try out A+ Investor, AAII Dividend Investing, the Stock Superstars Report, Growth Investing and VMQ Stocks. With the other premium services, you can dive deep into additional metrics, portfolios, commentary and information about Paper Products stocks as well as other industrys.

Choosing Which of the 3 Best Paper Products Stocks Is Right for You

Choosing which value stocks to invest in will ultimately depend on your individual goals and allocation; however, comparing similar value stocks in the same industry can help you analyze which might be better investments for you in the long run. So, let’s take a look at the Value Grade for all of our stocks.

• Clearwater Paper Corp stock has a Value Grade of A.
• Glatfelter Corp stock has a Value Grade of A.
• Sylvamo Corp stock has a Value Grade of A.

Now that you have a bit more background about each of the 3 undervalued stocks in the Paper Products industry as well as their overall grades, it’s time for you to conduct additional research to see if these could fit your portfolio needs based on your goals and risk tolerance. AAII can help you figure out both and identify which investments align with what works best for you.

We do so through a program of education that teaches you to invest for yourself and become an effective manager of your own wealth—no more relying on others for your financial independence. You can rely on AAII for timeless articles on financial planning and stock-picking, unbiased research and actionable analysis that makes you a better investor.

A+ Investor adds to that qualitative teaching by giving you a powerful data suite that helps you whittle down investment decisions to find stocks, exchange-traded funds (ETFs) or mutual funds that meet your needs.

Additional Resources About Paper Products Stocks

Want to learn more about Paper Products stocks to see if they could be the right investment for you? Check out some additional resources and articles to help you on your financial journey.

• 3 Undervalued Paper Products Stocks for Friday, May 03
• Why Clearwater Paper Corp’s (CLW) Stock Is Up 10.69%
• 3 Undervalued Paper Products Stocks for Monday, April 29
• 3 Undervalued Paper Products Stocks for Wednesday, April 10

AAII Disclaimer

We make no representations or warranties that any investor will, or is likely to, achieve profits similar to those shown, because past, hypothetical or simulated performance is not necessarily indicative of future results. Before making an investment decision, you should consider your circumstances and whether the information on our content is applicable to your situation. This information was prepared in good faith and we accept no liability for any errors or omissions. The full disclaimer can be read here.