Should Investors Reevaluate Packaging Corp After Recent Share Price Pullback in 2025?

Thinking about whether to buy, hold, or sell Packaging Corporation of America stock? You are not alone. Whether you are re-evaluating your portfolio or trying to get ahead of the next trend, the current numbers on this packaging giant are worth a closer look. After years of solid outperformance, racking up an impressive 101.9% gain over the past five years and nearly doubling in three, recent weeks have seen a bit of a breather. The stock has pulled back around 2.9% in the past week and month, and is down 8.8% for the year to date. These moves reflect a cooling off from last year’s run, perhaps in response to broader market shifts, rather than company-specific fundamentals. So, is this a temporary dip or a new normal for Packaging Corporation of America?

To help answer that, it is always smart to look beyond the headlines and dig into how the market is currently valuing the company. On our six-point valuation scorecard, which checks where packaging stocks might be trading at a discount, Packaging Corporation of America comes in at a solid 4, indicating it is undervalued in four out of six measures. Next, let us break down the key valuation methods that matter most to investors. Later on, I will share a perspective that can add even more clarity to judging whether this stock is truly a bargain.

Packaging Corporation of America delivered -4.5% returns over the last year. See how this stacks up to the rest of the Packaging industry.

Approach 1: Packaging Corporation of America Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model forecasts Packaging Corporation of America’s future free cash flows and brings those expected cash flows back to present-day value using a discount rate. It is a staple tool for long-term investors who want to understand the true underlying worth of a business based on projected financial performance, rather than just market sentiment.

Currently, the company generates approximately $629.5 million in Free Cash Flow (FCF). Analyst estimates see this figure trending upward, with projected FCF reaching around $1.29 billion by the end of 2029. Projections beyond 2029 are based on Simply Wall St’s own growth assumptions, but the near-term outlook relies on consensus forecasts. Across the next ten years, annual FCF is expected to climb steadily, reflecting confidence in the company’s operational and financial health.

Putting those numbers through the DCF model, the estimated fair value of Packaging Corporation of America comes out to $367.35 per share. Compared to its current price, this suggests the stock is trading at a 44.1% discount to intrinsic value. In other words, the market may not be fully appreciating the company’s future cash-generating power.

Result: UNDERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Packaging Corporation of America.

Our Discounted Cash Flow (DCF) analysis suggests Packaging Corporation of America is undervalued by 44.1%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Packaging Corporation of America Price vs Earnings

The Price-to-Earnings (PE) ratio is a popular and reliable way to value profitable companies like Packaging Corporation of America, as it directly relates the company’s current share price to its annual earnings. This metric is especially useful because it gives investors context by benchmarking how much they are paying for each dollar of earnings, making it easier to compare across companies that actually generate profits.

What counts as a “fair” PE ratio can vary depending on expectations for growth and perceived risks. Generally, companies with higher growth prospects or lower risks command higher PE multiples, while slower-growing or riskier companies tend to trade at lower ones. This is why it is important not to look at the PE ratio in isolation, but in the context of both the company’s outlook and its environment.

Packaging Corporation of America currently trades at a PE ratio of 20.4x. That is higher than the packaging industry average PE of 16.3x, yet well below the peer average of 31.2x. To address these differences, Simply Wall St has developed a “Fair Ratio” in this case, 20.9x, which considers not only the industry and peer benchmarks but also the company’s growth prospects, profit margins, risk profile, and market capitalization. Using this approach is more insightful than relying solely on raw averages, as it takes a holistic view of the company’s specific circumstances.

Comparing Packaging Corporation of America’s current PE (20.4x) with its Fair Ratio (20.9x), the stock appears to be valued about right by the market.

Result: ABOUT RIGHT

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Packaging Corporation of America Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives. A Narrative is a story you create about a company, tying together what you believe will drive its future, from how much it will earn to what its shares should be worth. Rather than just focusing on numbers, Narratives let you connect your unique view of Packaging Corporation of America’s strategy, market changes, and performance to concrete financial forecasts and a Fair Value calculation.

Narratives on Simply Wall St’s Community page make it easy for anyone, from experienced analysts to casual investors, to craft, update, and compare perspectives using clear, structured tools. As new company announcements or major news break, Narratives update dynamically, ensuring your view stays relevant. By comparing a Narrative’s Fair Value to today’s market price, you can quickly decide whether you think it is time to buy or sell. For example, some investors’ Narratives for Packaging Corporation of America see fair value as high as $244 based on robust cash flow and strategic acquisitions, while others are more cautious, setting it as low as $152 to reflect risk and industry uncertainty, so you decide which story feels most convincing for your investment decisions.

Do you think there's more to the story for Packaging Corporation of America? Create your own Narrative to let the Community know!

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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