Today's spotlight is on Pactiv Evergreen Inc (PTVE, Financial). With a daily gain of 18.64%, a three-month gain of 14.22%, and a reported Loss Per Share of 0.41, we are left with the question: Is Pactiv Evergreen stock fairly valued? This article provides a comprehensive analysis of Pactiv Evergreen's valuation, encouraging readers to delve into the subsequent sections for a detailed understanding of the company's value.
Company Introduction
Pactiv Evergreen Inc is a leading manufacturer and distributor of fresh foodservice and food merchandising products, and fresh beverage cartons. The company operates in three segments: Foodservice, Food Merchandising, and Beverage Merchandising. These segments manufacture a broad range of products, with the majority of its revenue coming from the United States. Comparing the stock price of $10.12 per share and the GF Value of $11.11, Pactiv Evergreen stock appears to be fairly valued.
Understanding the GF Value
The GF Value represents the current intrinsic value of a stock, derived from our exclusive method. It is calculated based on historical multiples that the stock has traded at, a GuruFocus adjustment factor based on the company's past performance and growth, and future estimates of the business performance. The GF Value Line on our summary page gives an overview of the fair value that the stock should be traded at. If the stock price is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher.
At its current price of $10.12 per share and the market cap of $1.80 billion, Pactiv Evergreen stock is estimated to be fairly valued. Consequently, the long-term return of its stock is likely to be close to the rate of its business growth.
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Assessing Financial Strength
It is always important to check the financial strength of a company before buying its stock. Investing in companies with poor financial strength have a higher risk of permanent loss. Looking at the cash-to-debt ratio and interest coverage is a great way to understand the financial strength of a company. Pactiv Evergreen has a cash-to-debt ratio of 0.07, which is worse than 82.98% of 376 companies in the Packaging & Containers industry. The overall financial strength of Pactiv Evergreen is 4 out of 10, which indicates that the financial strength of Pactiv Evergreen is poor.
Profitability and Growth
Investing in profitable companies carries less risk, especially in companies that have demonstrated consistent profitability over the long term. Typically, a company with high profit margins offers better performance potential than a company with low profit margins. Pactiv Evergreen has been profitable 7 years over the past 10 years. During the past 12 months, the company had revenues of $5.90 billion and Loss Per Share of $0.41. Its operating margin of 1.63% worse than 76.76% of 383 companies in the Packaging & Containers industry. Overall, GuruFocus ranks Pactiv Evergreen's profitability as fair.
Growth is probably the most important factor in the valuation of a company. GuruFocus research has found that growth is closely correlated with the long term stock performance of a company. A faster growing company creates more value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth of Pactiv Evergreen is 5.6%, which ranks worse than 56.99% of 365 companies in the Packaging & Containers industry. The 3-year average EBITDA growth rate is 3.4%, which ranks worse than 57.14% of 350 companies in the Packaging & Containers industry.
Another method of determining the profitability of a company is to compare its return on invested capital to the weighted average cost of capital. Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. When the ROIC is higher than the WACC, it implies the company is creating value for shareholders. For the past 12 months, Pactiv Evergreen's return on invested capital is 3.88, and its cost of capital is 7.77.
Conclusion
Overall, Pactiv Evergreen (PTVE, Financial) stock is estimated to be fairly valued. The company's financial condition is poor and its profitability is fair. Its growth ranks worse than 57.14% of 350 companies in the Packaging & Containers industry. To learn more about Pactiv Evergreen stock, you can check out its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
