Stock Analysis

Does Packaging Corporation of America (NYSE:PKG) Deserve A Spot On Your Watchlist?

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NYSE:PKG
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For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

In contrast to all that, many investors prefer to focus on companies like Packaging Corporation of America (NYSE:PKG), which has not only revenues, but also profits. Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

See our latest analysis for Packaging Corporation of America

Packaging Corporation of America's Earnings Per Share Are Growing

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That makes EPS growth an attractive quality for any company. Packaging Corporation of America managed to grow EPS by 9.2% per year, over three years. That's a pretty good rate, if the company can sustain it.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. The good news is that Packaging Corporation of America is growing revenues, and EBIT margins improved by 4.4 percentage points to 18%, over the last year. That's great to see, on both counts.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

earnings-and-revenue-history
NYSE:PKG Earnings and Revenue History September 7th 2022

While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for Packaging Corporation of America?

Are Packaging Corporation of America Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a US$13b company like Packaging Corporation of America. But we do take comfort from the fact that they are investors in the company. Indeed, they have a considerable amount of wealth invested in it, currently valued at US$208m. This suggests that leadership will be very mindful of shareholders' interests when making decisions!

Does Packaging Corporation of America Deserve A Spot On Your Watchlist?

One positive for Packaging Corporation of America is that it is growing EPS. That's nice to see. If that's not enough on its own, there is also the rather notable levels of insider ownership. That combination is very appealing. So yes, we do think the stock is worth keeping an eye on. Still, you should learn about the 1 warning sign we've spotted with Packaging Corporation of America.

The beauty of investing is that you can invest in almost any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

Valuation is complex, but we're helping make it simple.

Find out whether Packaging Corporation of America is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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About NYSE:PKG

Packaging Corporation of America

Packaging Corporation of America manufactures and sells containerboard and corrugated packaging products in the United States.

The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.

Analysis AreaScore (0-6)
Valuation4
Future Growth0
Past Performance6
Financial Health4
Dividends5

Read more about these checks in the individual report sections or in our analysis model.

Outstanding track record established dividend payer.