WestRock Co Valuation – August 2016 $WRK

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Companies Benjamin Graham Would Invest In Today - July 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how WestRock Co (WRK) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Westrock Company is a provider of packaging solutions and manufactures containerboard and paperboard. The Company’s operating segments include Corrugated Packaging, Consumer Packaging, Specialty Chemicals, and Land and Development. The Company operates in North America, South America, Europe and Asia. It also operates a specialty chemicals business and develops real estate in Charleston, South Carolina. The Company’s corrugated packaging system manufactures containerboard, corrugated sheets, corrugated packaging and preprinted linerboard for sale to consumer and industrial products manufacturers and corrugated box manufacturers. It operates virgin and recycled fiber paperboard mills and consumer packaging converting operations, which convert items, such as folding and beverage cartons, displays, dispensing and interior partitions. The Company manufactures, markets and distributes specialty chemicals derived from sawdust and other byproducts of the papermaking process.

WRK Chart

WRK data by YCharts

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Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.


Downloadable PDF version of this valuation:

ModernGraham Valuation of WRK – August 2016

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $11,297,233,407 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.74 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 73.49% Pass
6. Moderate PEmg Ratio PEmg < 20 14.46 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.03 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.74 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 3.10 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

WRK value chart August 2016

EPSmg $3.02
MG Growth Estimate 8.04%
MG Value $74.34
Opinion Undervalued
MG Grade A
MG Value based on 3% Growth $43.85
MG Value based on 0% Growth $25.71
Market Implied Growth Rate 2.98%
Current Price $43.72
% of Intrinsic Value 58.81%

WestRock Co qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the low current ratio. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.97 in 2012 to an estimated $3.02 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.98% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into WestRock Co revealed the company was trading below its Graham Number of $48.57. The company pays a dividend of $1.45 per share, for a yield of 3.3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 14.46, which was below the industry average of 53.08, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-38.4.

WestRock Co fares extremely well in the ModernGraham grading system, scoring an A.

Stage 3: Information for Further Research

WRK charts August 2016

Net Current Asset Value (NCAV) -$38.40
Graham Number $48.57
PEmg 14.46
Current Ratio 1.74
PB Ratio 1.03
Current Dividend $1.45
Dividend Yield 3.31%
Number of Consecutive Years of Dividend Growth 4


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Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2016
Total Current Assets $4,449,200,000
Total Current Liabilities $2,557,100,000
Long-Term Debt $5,858,300,000
Total Assets $25,268,400,000
Intangible Assets $8,659,600,000
Total Liabilities $14,333,000,000
Shares Outstanding (Diluted Average) 257,400,000

Earnings Per Share History

Next Fiscal Year Estimate $2.42
Sep2015 $2.93
Sep2014 $3.29
Sep2013 $4.98
Sep2012 $1.73
Sep2011 $1.39
Sep2010 $2.85
Sep2009 $2.88
Sep2008 $1.07
Sep2007 $1.04
Sep2006 $0.39
Sep2005 $0.25
Sep2004 $0.25
Sep2003 $0.43
Sep2002 $0.39
Sep2001 $0.46
Sep2000 -$0.23
Sep1999 $0.57
Sep1998 $0.60
Sep1997 $0.24
Sep1996 $0.75

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $3.02
Sep2015 $3.17
Sep2014 $3.14
Sep2013 $2.97
Sep2012 $1.97
Sep2011 $2.01
Sep2010 $2.09
Sep2009 $1.52
Sep2008 $0.76
Sep2007 $0.56
Sep2006 $0.33
Sep2005 $0.32
Sep2004 $0.32
Sep2003 $0.34
Sep2002 $0.32
Sep2001 $0.30
Sep2000 $0.28

Recommended Reading:

Other ModernGraham posts about the company

10 Undervalued Companies for the Defensive Dividend Stock Investor – July 2016
10 Undervalued Companies for the Defensive Dividend Stock Investor – June 2016
Stocks Trading Below Their Graham Number – June 2016
10 Most Undervalued Companies for the Defensive Investor – June 2016
10 Low PE Stocks for the Defensive Investor – May 2016

Other ModernGraham posts about related companies

Bemis Company Inc Valuation – July 2016 $BMS
Owens-Illinois Inc Valuation – June 2016 $OI
Bemis Co Inc Valuation – January 2016 Update $BMS
WestRock Co Valuation – January 2016 Update $WRK
WestRock Co Valuation – January 2016 Update $WRK
International Paper Co Valuation – December 2015 Update $IP
Bemis Company Inc. Analysis – September 2015 Update $BMS
WestRock Co. Analysis – Initial Coverage $WRK
International Paper Company Analysis – September 2015 Update $IP
Ball Corporation Analysis – 2015 Update $BLL


The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

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