UPM (HLSE:UPM) Valuation After Launching Its Circular Renewable Black Carbon-Negative Packaging Pigment

UPM Kymmene Oyj (HLSE:UPM) just launched Circular Renewable Black, a carbon negative, NIR detectable pigment that finally makes deep black packaging fully recyclable, and it fits neatly with the group’s long term bio-based growth story.

See our latest analysis for UPM-Kymmene Oyj.

Despite this flurry of strategic moves, including the planned graphic paper joint venture with Sappi and ongoing portfolio reshaping, UPM Kymmene Oyj’s year to date share price return of minus 12.4 percent and three year total shareholder return of minus 20.86 percent suggest momentum has been weak. However, a modest 90 day share price return of 1.15 percent hints that sentiment may slowly be stabilising as investors reassess its long term bio-based growth story.

If this kind of circular, low carbon innovation has your attention, it could be a good moment to broaden your search and discover fast growing stocks with high insider ownership.

With earnings now rebounding and the shares trading at a hefty discount to some intrinsic value estimates, the real question is whether UPM is still overlooked value or if the market already reflects its bio-based growth ambitions.

Most Popular Narrative: 7.7% Undervalued

Compared with the last close of €23.81, the most popular narrative sees modest upside based on a higher long term fair value and ambitious earnings recovery.

The analysts have a consensus price target of €27.127 for UPM-Kymmene Oyj based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €32.0, and the most bearish reporting a price target of just €21.0.

Read the complete narrative.

Want to know what kind of revenue path, margin rebuild, and future earnings multiple have to line up to make that upside stick? The full narrative spells out the bold assumptions that turn today’s modest discount into tomorrow’s potential rerating.

Result: Fair Value of €25.79 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, structural decline in communication papers and persistently high Finnish wood costs could squeeze margins and delay the earnings recovery that underpins that upside case.

Find out about the key risks to this UPM-Kymmene Oyj narrative.

Another View: Multiples Paint a Tougher Picture

On earnings based valuation, UPM looks far less forgiving. Its price to earnings ratio of about 101 times dwarfs both the European forestry average of roughly 21 times and a fair ratio near 48 times, implying meaningful downside if sentiment normalises or earnings disappoint.

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own UPM-Kymmene Oyj Narrative

If this outlook does not quite fit your view or you prefer to dig into the numbers yourself, you can build a custom narrative in just minutes: Do it your way.

A great starting point for your UPM-Kymmene Oyj research is our analysis highlighting 2 key rewards and 3 important warning signs that could impact your investment decision.

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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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