Long-established in the Packaging & Containers industry, International Paper Co (IP, Financial) has enjoyed a stellar reputation. However, it has recently witnessed a daily loss of 0.83%, juxtaposed with a three-month change of 25.02%. Fresh insights from the GF Score hint at potential headwinds. Notably, its diminished rankings in financial strength, growth, and valuation suggest that the company might not live up to its historical performance. Join us as we dive deep into these pivotal metrics to unravel the evolving narrative of International Paper Co.
What Is the GF Score?
The GF Score is a stock performance ranking system developed by GuruFocus using five aspects of valuation, which has been found to be closely correlated to the long-term performances of stocks by backtesting from 2006 to 2021. The stocks with a higher GF Score generally generate higher returns than those with a lower GF Score. Therefore, when picking stocks, investors should invest in companies with high GF Scores. The GF Score ranges from 0 to 100, with 100 as the highest rank.
- Financial strength rank: 5/10
- Profitability rank: 7/10
- Growth rank: 4/10
- GF Value rank: 1/10
- Momentum rank: 10/10
Based on the above method, GuruFocus assigned International Paper Co the GF Score of 67 out of 100, which signals poor future outperformance potential.
Understanding International Paper Co Business
International Paper Co, with a market capitalization of $20.27 billion, is a major player in the packaging products and cellulose fibers industry. The company accounts for roughly one-third of the North American corrugated packaging market. Despite having operations in Brazil, India, and China, more than three-fourths of its sales come from North America. International Paper serves a variety of end markets, including industrial, consumer products, and manufacturing. The company reported sales of $18.64 billion and an operating margin of 2.08%.
Financial Strength Breakdown
International Paper Co's financial strength indicators present some concerning insights about the company's balance sheet health. International Paper Co has an interest coverage ratio of 0.9, which positions it worse than 92.38% of 315 companies in the Packaging & Containers industry. This ratio highlights potential challenges the company might face when handling its interest expenses on outstanding debt. It's worth noting that the esteemed investor Benjamin Graham typically favored companies with an interest coverage ratio of at least five.
The company's Altman Z-Score is just 2.42, which is below the safe threshold of 2.99. Although this does not imply immediate danger of financial distress, the stock may face some financial struggles if the Altman Z-score drops below 1.81. Additionally, the company's low cash-to-debt ratio at 0.2 indicates a struggle in handling existing debt levels.
Growth Prospects
A lack of significant growth is another area where International Paper Co seems to falter, as evidenced by the company's low Growth rank. Lastly, International Paper Co predictability rank is just one star out of five, adding to investor uncertainty regarding revenue and earnings consistency.
Next Steps
International Paper Co's financial strength, profitability, and growth metrics, as highlighted by the GF Score, underscore the firm's potential for underperformance. Investors should be cautious and consider these factors when evaluating the company's future prospects. For those seeking companies with stronger GF Scores, GuruFocus Premium members can explore more options using the following screener link: GF Score Screen.
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.
