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 Wednesday, May 29, 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.

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 87, which is considered to be undervalued.

When you look at Glatfelter Corp’s price-to-sales ratio at 0.06 compared to the industry median at 0.33, this company has a lower price relative to revenue compared to its peers. This could make Glatfelter Corp’s stock more attractive for value investors.

Now, let’s assess Glatfelter Corp’s EV/EBITDA ratio, also known as enterprise multiple. At 10.7, when compared to the industry median of 5.3, the company may be considered overvalued 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. Glatfelter Corp’s shareholder yield is lower than its industry median ratio of 1.91%. 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. Glatfelter Corp’s price-to-book ratio is lower than its industry median ratio of 0.96. This could make Glatfelter Corp more attractive to investors looking for a new addition to their portfolio.

Mercer International Inc.’s Value Grade

Value Grade:

Mercer International Inc. is a global forest products company. The Company’s segments include Pulp and Wood Products. The Company's four pulp mills and its 50% interest in the Cariboo pulp mill are aggregated into the pulp segment. Its wood segment includes the Friesau sawmill, the Torgau facility, and the Mercer Mass Timber facility. It owns a cross-laminated timber (CLT) facility located in Spokane, Washington called Mercer Mass Timber LLC. It produces electrical and thermal energy from biomass byproducts. Its products include pulp products, timber products, mass timber, green energy, bio extractives and biomaterials, biofuels, pallets, wood and transport services, and logistic services. Its operations include Mercer Celgar, Mercer Forestry Services, Mercer Holz, Mercer Logistik, Mercer Mass Timber, Mercer Peace River, Cariboo Pulp & Paper, Mercer Timber Products and Santanol. It also owns production facilities located in Conway, Arkansas and in Penticton, British Columbia, Canada.

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.

Mercer International Inc. has a Value Score of 66, which is considered to be undervalued.

Mercer International Inc.’s price-to-book ratio is lower than its peers. This could make Mercer International Inc. more attractive for value investors when compared to the industry median at 0.96.

You can read more about Mercer International Inc.’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.

Sappi Ltd (ADR)’s Value Grade

Value Grade:

Sappi Limited is a South Africa-based global provider of everyday materials made from wood fiber-based renewable resources. The Company operates in Europe, North America and South Africa. The Company offers raw material products, such as dissolving pulp, wood pulp and biomaterials, and end-use products, such as packaging and specialty papers, graphic papers, casting and release papers and forestry products. Its Verve brand is focused on the dissolving pulp market. Its graphic paper brands include Galerie, GalerieArt, Magno, Vantage, Quatro, Royal, McCoy, Somerset, EuroArt Plus, Opus, Flo, Classics and Ultracast, among others. Its graphic paper products include GalerieArt Web Gloss, GalerieArt Web Matt, Flo Sheets, Flo Web, Flo Digital, Quatro Gloss, Magno Web Gloss and Somerset Web. Its packaging and specialty paper products include flexible packaging papers, label papers, functional paper packaging, containerboard, paperboard, silicone base papers and dye sublimation papers.

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.

Sappi Ltd (ADR) has a Value Score of 84, which is considered to be undervalued.

Sappi Ltd (ADR)’s price-to-book ratio is higher than its peers. This could make Sappi Ltd (ADR) less attractive for value investors when compared to the industry median at 0.96.

You can read more about Sappi Ltd (ADR)’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.

• Glatfelter Corp stock has a Value Grade of A.
• Mercer International Inc. stock has a Value Grade of B.
• Sappi Ltd (ADR) 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 Wednesday, May 29
• Why Mercer International Inc.’s (MERC) Stock Is Up 4.13%
• Why Mercer International Inc.’s (MERC) Stock Is Down 5.60%
• Why Mercer International Inc.’s (MERC) Stock Is Down 4.50%

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.