Amcor PLC (AMCR, Financial) experienced a daily loss of 0.55% and a 3-month loss of 6.81%. Despite these losses, the company's Earnings Per Share (EPS) stands at 0.65. This leads us to an important question: Is Amcor PLC significantly undervalued? To answer this question, we've conducted a comprehensive valuation analysis. We invite you to read on to gain valuable insights into Amcor PLC's true worth.
Company Introduction
Amcor PLC (AMCR, Financial) is a renowned manufacturer of flexible and rigid plastic packaging. The company provides packaging solutions to a wide range of sectors including food, beverage, pharmaceuticals, medical, household, personal care, and industrials. Operating in more than 40 countries and over 200 locations, Amcor PLC has a strong global presence. The company operates two distinct businesses: flexibles and rigids, with flexibles accounting for about 80% of earnings.
With a current stock price of $9.06, Amcor PLC is significantly undervalued when compared to its GF Value of $13.35. This discrepancy between the stock price and the GF Value paves the way for a deeper exploration of the company's value.
Understanding the GF Value
The GF Value is a proprietary measure that represents the current intrinsic value of a stock. It is calculated based on historical multiples, a GuruFocus adjustment factor based on the company's past returns and growth, and future business performance estimates. The GF Value Line provides an overview of the fair value that the stock should ideally be traded at.
If a stock's price is significantly above the GF Value Line, it is considered overvalued and its future return is likely to be poor. Conversely, if the stock's price is significantly below the GF Value Line, the stock may be undervalued and its future return could be higher. According to our analysis, Amcor PLC appears to be significantly undervalued with a market cap of $13.10 billion.
Given its undervalued status, the long-term return of Amcor PLC's stock is likely to be much higher than its business growth.
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Financial Strength
Investing in companies with low financial strength could result in permanent capital loss. Therefore, it is crucial to carefully review a company's financial strength before investing. A good starting point is to look at the cash-to-debt ratio and interest coverage. Amcor PLC has a cash-to-debt ratio of 0.07, which ranks worse than 82.93% of 375 companies in the Packaging & Containers industry. Based on this, GuruFocus ranks Amcor PLC's financial strength as 4 out of 10, indicating a poor balance sheet.
Profitability and Growth
Investing in profitable companies carries less risk, especially if the company has demonstrated consistent profitability over the long term. Companies with high profit margins typically offer better performance potential than those with low profit margins. Amcor PLC has been profitable 10 years over the past 10 years. The company had revenues of $14.40 billion and Earnings Per Share (EPS) of $0.65 in the past 12 months. Its operating margin of 9.42% is better than 72.32% of 383 companies in the Packaging & Containers industry. Overall, GuruFocus ranks Amcor PLC's profitability as fair.
Growth is a crucial factor in the valuation of a company. Our research has found that growth is closely correlated with the long-term performance of a company's stock. If a company's business is growing, it usually creates value for its shareholders, especially if the growth is profitable. Conversely, if a company's revenue and earnings are declining, the value of the company will decrease. Amcor PLC's 3-year average revenue growth rate is better than 55.34% of 365 companies in the Packaging & Containers industry. Its 3-year average EBITDA growth rate is 11.1%, which ranks better than 61.43% of 350 companies in the Packaging & Containers industry.
ROIC vs WACC
Another way to assess a company's profitability is to compare its return on invested capital (ROIC) with its weighted cost of capital (WACC). ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. Ideally, ROIC should be higher than WACC. For the past 12 months, Amcor PLC's ROIC is 8.52, and its WACC is 6.89.
Conclusion
In conclusion, the stock of Amcor PLC appears to be significantly undervalued. The company's financial condition is poor, but its profitability is fair. Its growth ranks better than 61.43% of 350 companies in the Packaging & Containers industry. For more details about Amcor PLC's 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.
