Packaging Corporation of America (PKG): Reassessing Valuation After Wallula Mill Shutdown and Softer Box Demand

Packaging Corporation of America (PKG) just delivered a one two punch to investors: a softer industry demand outlook for boxes and a plan to permanently shut key operations at its Wallula mill.

See our latest analysis for Packaging Corporation of America.

Those demand worries and the Wallula restructuring help explain why the share price return is down around 10 percent over the past quarter, even though the five year total shareholder return is still strongly positive. This suggests long term holders are reassessing momentum rather than abandoning the story.

If this kind of inflection point has you reviewing your playbook, it could be a good moment to broaden your watchlist and explore fast growing stocks with high insider ownership.

With the stock down double digits over three months yet still trading below analyst targets and many fair value estimates, should investors view PKG as a mispriced cash generator, or has the market already discounted its next leg of growth?

Most Popular Narrative: 11.7% Undervalued

Based on the most widely followed narrative, Packaging Corporation of America’s fair value of $224.70 sits meaningfully above the recent $198.48 close, framing an upside case grounded in earnings and margin expansion rather than a short term rebound.

Analysts are assuming Packaging Corporation of America's revenue will grow by 3.2% annually over the next 3 years.

Analysts assume that profit margins will increase from 10.4% today to 11.8% in 3 years time.

Read the complete narrative.

Want to see what happens when steady revenue growth collides with rising margins and a dialed back earnings multiple, all discounted through a precise rate assumption? The full narrative sets out a detailed earnings runway, a future valuation multiple and a disciplined hurdle rate that together form the basis for this premium to today’s share price, but the exact mix of moving parts might surprise you.

Result: Fair Value of $224.70 (UNDERVALUED)

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

However, softer containerboard demand and higher operational costs could quickly squeeze margins and challenge the assumption that PKG smoothly delivers its projected earnings ramp.

Find out about the key risks to this Packaging Corporation of America narrative.

Build Your Own Packaging Corporation of America Narrative

And if you see the story playing out differently, or simply want to dig into the numbers yourself, you can quickly build a personalized view in just a few minutes: Do it your way.

A great starting point for your Packaging Corporation of America research is our analysis highlighting 4 key rewards and 2 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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