Amcor PLC (AMCR, Financial) has recently shown a notable daily gain of 9.62%, with a 3-month gain of 5.03%. With an Earnings Per Share (EPS) of $0.45, investors may question whether the stock is currently undervalued. This analysis aims to delve into Amcor PLC's valuation and assess its true market value.
Company Overview
Amcor PLC is a leading global producer of plastic packaging, primarily serving the fast-moving consumer goods industry. The company's operations are widespread, with significant market share in North America, Latin America, Europe, and the Asia-Pacific. Approximately 85% of its earnings come from the flexible packaging business, which includes a variety of food, drink, healthcare, and hygiene products. The remaining earnings stem from the rigids business in Latin and North America, largely focusing on beverage bottling for the soft-drink industry. With a market cap of $14.20 billion and sales amounting to $13.80 billion, understanding its valuation is crucial for investors.
Understanding the GF Value
The GF Value is a proprietary measure used to determine the intrinsic value of a stock, incorporating historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. For Amcor PLC, the GF Value is set at $12.34, suggesting that at its current price of $9.8 per share, the stock appears modestly undervalued. This positioning indicates a potential for higher future returns relative to its business growth.
Financial Strength and Risks
Investigating the financial strength of Amcor PLC, it's evident that the company faces some challenges. With a cash-to-debt ratio of 0.06, Amcor ranks lower than 86.51% of its peers in the Packaging & Containers industry. This low ratio, combined with an overall financial strength rating of 4 out of 10, signals potential risks in terms of financial stability and debt management.
Profitability and Growth Prospects
Amcor PLC has maintained profitability over the past decade, with a notable operating margin of 9.11%, ranking better than 68.41% of industry competitors. The company's revenue growth rate over the past three years has been 8.6%, positioning it well within its sector. Furthermore, the EBITDA growth rate stands at 11.1%, reflecting a strong potential for future value creation.
Evaluating Return on Investment
Comparing the Return on Invested Capital (ROIC) of 7.5 to the Weighted Average Cost of Capital (WACC) of 6.35 provides insight into Amcor's efficiency in generating returns on investments relative to its costs. This positive spread indicates that Amcor is effectively creating value for its shareholders.
Conclusion
Overall, Amcor PLC (AMCR, Financial) presents itself as modestly undervalued. With solid profitability, adequate growth rates, and effective capital management, the company holds potential for higher future returns. For a deeper dive into Amcor's financials and to explore other high-quality investment opportunities, visit GuruFocus High Quality Low Capex Screener.
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.
