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 Packaging 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 Packaging 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 Packaging 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 Packaging industry for Monday, June 17, 2024. Let’s take a closer look at their individual scores to see how they measure up against each other and the Paper Packaging 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.

Klabin SA (ADR)’s Value Grade

Value Grade:

Klabin S.A. and its subsidiaries operate in segments of the paper and pulp industry, supplying the domestic and foreign markets with wood, packaging paper, paper sacks, corrugated cardboard boxes and pulp. The Company's segments include Forestry, Paper, Conversion and Pulp. The Forestry segment involves operations relating to planting and growing pine and eucalyptus trees to supply its plants, and involves selling timber to third parties in the domestic market. The Paper segment involves the production and sale of cardboard, kraftliner and recycled paper rolls in the domestic and foreign markets. The Conversion segment involves the production and sale of corrugated cardboard boxes, corrugated cardboard and industrial sacks in the domestic and foreign markets. The Pulp segment includes the production and sale of short fiber bleached pulp, long fiber bleached pulp and fluff pulp in the domestic and foreign markets. The Company has over 20 industrial units in Brazil and Argentina.

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.

Klabin SA (ADR) has a Value Score of 78, which is considered to be undervalued.

When you look at Klabin SA (ADR)’s price-to-sales ratio at 1.27 compared to the industry median at 0.84, this company has a higher price relative to revenue compared to its peers. This could make Klabin SA (ADR)’s stock less attractive for value investors.

Klabin SA (ADR)’s price-earnings ratio is 11.46 compared to the industry median at 18.65. This means it has a lower share price relative to earnings compared to its peers. This could make Klabin SA (ADR) more attractive for value investors.

Now, let’s assess Klabin SA (ADR)’s EV/EBITDA ratio, also known as enterprise multiple. At 9.0, when compared to the industry median of 9.0, the company may be considered fairly valued 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. Klabin SA (ADR)’s shareholder yield is higher than its industry median ratio of 1.61%. 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. Klabin SA (ADR)’s price-to-book ratio is higher than its industry median ratio of 1.27. This could make Klabin SA (ADR) less attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Klabin SA (ADR)’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Klabin SA (ADR)’s price-to-free-cash-flow ratio is lower than its industry median ratio of 15.69. This could make Klabin SA (ADR) more attractive because the lower P/FCF ratio indicates that Klabin SA (ADR) 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.

Stora Enso OYJ (ADR)’s Value Grade

Value Grade:

Stora Enso Oyj is a Finland-based provider of renewable solutions in packaging, biomaterials, wooden construction and paper industries. The Company has six divisions: the Packaging Materials division provides renewable packaging materials based on both virgin and recycled fiber, the Packaging Solutions division develops and sells premium fiber-based packaging products and services; the Biomaterials division offers a variety of pulp grades to the paper, board, tissue, textile and hygiene product producers; the Wood Products division is a sawn wood producer and a provider of wood-based solutions to the construction industry; the Forest division manages Stora Enso’s forest assets in Sweden and is responsible for wood sourcing for Stora Enso’s Nordic, Baltic and Russian operations and the Paper division, that provides paper products made from recycled and virgin fiber. Stora Enso Oyj operates worldwide.

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.

Stora Enso OYJ (ADR) has a Value Score of 65, which is considered to be undervalued.

Stora Enso OYJ (ADR)’s price-to-book ratio is higher than its peers. This could make Stora Enso OYJ (ADR) less attractive for value investors when compared to the industry median at 1.27.

You can read more about Stora Enso OYJ (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.

Sonoco Products Co’s Value Grade

Value Grade:

Sonoco Products Company is a sustainable global packaging company. The Company's segments include Consumer Packaging and Industrial Paper Packaging. The Consumer Packaging segment's products consist of rigid packaging (paper, metal, and plastic) and flexible packaging, primarily serving the consumer staples market focused on food, beverage, household, and personal products. Its rigid plastic products are comprised of thermoformed plastic trays and enclosures for fresh produce, condiments, and pre-packaged foods. Its flexible packaging is comprised of plastic packaging serving a variety of food and personal product applications. The Industrial Paper Packaging segment's products consist of goods produced from recycled fiber including paperboard tubes, cores, cones and cans; partitions; paper-based protective materials, and uncoated recycled paperboard. Its other businesses consist of a variety of packaging materials including plastic, paper, foam, and various other specialty materials.

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.

Sonoco Products Co has a Value Score of 65, which is considered to be undervalued.

Sonoco Products Co’s price-earnings ratio is 14.5 compared to the industry median at 18.6. This means that it has a lower price relative to its earnings compared to its peers. This makes Sonoco Products Co more attractive for value investors.

Sonoco Products Co’s price-to-book ratio is lower than its peers. This could make Sonoco Products Co more attractive for value investors when compared to the industry median at 1.27.

You can read more about Sonoco Products Co’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 Packaging 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 Packaging stocks as well as other industrys.

Choosing Which of the 3 Best Paper Packaging 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.

• Klabin SA (ADR) stock has a Value Grade of B.
• Stora Enso OYJ (ADR) stock has a Value Grade of B.
• Sonoco Products Co stock has a Value Grade of B.

Now that you have a bit more background about each of the 3 undervalued stocks in the Paper Packaging 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 Packaging Stocks

Want to learn more about Paper Packaging 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 Packaging Stocks for Monday, June 17
• 3 Undervalued Paper Packaging Stocks for Friday, June 14
• 3 Undervalued Paper Packaging Stocks for Wednesday, June 12
• Why Ranpak Holdings Corp’s (PACK) Stock Is Down 4.66%

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.