Amcor PLC (AMCR, Financial) recently experienced a daily loss of 0.83%, yet it has managed a 3-month gain of 2.86%. With an Earnings Per Share (EPS) of $0.65, investors are keen to understand whether the current market price reflects the company's true value. Is Amcor PLC modestly undervalued as the market suggests? This article presents a valuation analysis to explore this question further.
Company Introduction
Amcor PLC is a leading global manufacturer in the packaging industry, providing a broad range of solutions across multiple sectors. The company's operations span more than 40 countries and over 200 locations, with a significant presence in North America and Europe. Amcor PLC operates two main business segments: flexibles and rigids, with flexibles contributing roughly 80% to earnings. The company's current stock price is $9.57, with a market cap of $13.80 billion, which stands modestly undervalued compared to the GF Value of $13.26. This discrepancy sets the stage for an in-depth assessment of Amcor PLC's valuation.
Summarize GF Value
The GF Value is a unique measure that reflects the intrinsic value of a stock, considering historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. If Amcor PLC's stock price is significantly below the GF Value Line, it suggests that the stock may offer a higher future return. Currently, Amcor PLC's stock price indicates that the company is modestly undervalued, hinting at a potentially higher long-term return than its business growth alone would suggest.
Financial Strength
Investing in companies with robust financial strength is crucial to minimize the risk of capital loss. Amcor PLC's cash-to-debt ratio of 0.07 is lower than 84.29% of its industry peers, signaling potential concerns. The company's financial strength is rated 4 out of 10 by GuruFocus, indicating that Amcor PLC's financial health could be stronger.
Profitability and Growth
Profitability is a key indicator of a company's financial health. Amcor PLC has maintained profitability for the past decade, with a solid operating margin of 9.42%, which is more competitive than 73.25% of the industry. The company's profitability is considered fair by GuruFocus standards. Additionally, growth is a vital aspect of valuation, and Amcor PLC's 3-year average annual revenue growth of 8.6% is commendable, outpacing over half of its industry competitors.
ROIC vs WACC
Comparing a company's Return on Invested Capital (ROIC) to its Weighted Average Cost of Capital (WACC) provides insights into its profitability relative to its costs. Amcor PLC's ROIC of 8.52% over the past 12 months surpasses its WACC of 7.05%, indicating efficient capital management. This positive spread suggests the company is generating value for its shareholders.
Conclusion
In conclusion, Amcor PLC (AMCR, Financial) appears to be modestly undervalued, offering potential for higher future returns. Despite some concerns over its financial strength, the company's fair profitability and solid growth prospects make it an intriguing option for value investors. To gain a deeper understanding of Amcor PLC's financials, interested investors can examine the company's 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.
