Winpak (TSX:WPK): Assessing Valuation Following Earnings Decline and Share Buyback Completion

Winpak (TSX:WPK) just shared its latest quarterly earnings, revealing modest drops in both sales and net income compared to a year ago. In addition, the company wrapped up a sizable share buyback program.

See our latest analysis for Winpak.

After a challenging quarter, Winpak’s short-term share price has demonstrated resilience, posting a 4.7% return over the last 90 days even as its 1-year total shareholder return remains down by 7.9%. Momentum has picked up slightly following the recently completed share buyback. However, long-term investors have still outperformed broader materials averages over the past three and five years.

If recent buybacks have you considering new strategies, why not broaden your scope and discover fast growing stocks with high insider ownership

With earnings slipping, share buybacks completed, and the stock still trading at a notable discount to analyst targets, the crucial question is whether Winpak is undervalued or if the market already reflects its growth prospects.

Price-to-Earnings of 13.5x: Is it justified?

Winpak's shares are trading at a price-to-earnings (P/E) ratio of 13.5x, which is below the peer average and industry benchmarks, with a last close of CA$43.02.

The P/E ratio shows how much investors are willing to pay today for a dollar of the company’s future earnings. In packaging, where margins and steady profits matter, this metric is crucial for gauging value and market sentiment.

With Winpak’s 13.5x multiple below the global packaging industry average of 16x and a fair P/E ratio estimation of 15.2x, the market appears to be undervaluing its consistent earnings and profit track record. If Winpak continues to deliver solid results, the multiple could trend closer to what our regression model suggests as fair value.

Explore the SWS fair ratio for Winpak

Result: Price-to-Earnings of 13.5x (UNDERVALUED)

However, slowing revenue and net income growth rates could weigh on sentiment if margins face pressure or if industry demand falters in coming quarters.

Find out about the key risks to this Winpak narrative.

Another View: What Does the SWS DCF Model Say?

Looking at Winpak from another angle, our SWS DCF model suggests an even greater discount, indicating the shares trade well below fair value estimates. This raises the question: are investors overlooking the company’s long-term cash flow potential, or is there an underlying risk being priced in?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Winpak for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 840 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Winpak Narrative

If you see things differently or want to dive deeper into Winpak’s data, you can quickly build your own perspective in just a few minutes. Do it your way

A good starting point is our analysis highlighting 3 key rewards investors are optimistic about regarding Winpak.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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