Inside The Bedokian’s Portfolio is an intermittent series where I will reveal what is actually inside our investment portfolio, one company/bond/REIT/ETF at a time. In each post I will talk a bit about the counter, why I had selected it and what lies ahead in the future.
Today’s post is a company that is listed on the New York Stock Exchange called International Paper (IP).
A Chance Encounter
IP is in the business of manufacturing packaging materials, paper and pulp, as well as providing recycling solutions and services. One of the major clients for its corrugated boxes is Amazon, one of the world’s largest e-retailer.
I had chanced upon IP early this year when a video appeared on my YouTube feed introducing it as “how the world’s largest paper company makes 1/3 of cardboard boxes in America” (if you are interested in the video, link to it under Reference below), and it piqued my interest.
Figures And Opinions
With a price-to-book (P/B) ratio of 1.41 and a forward price-to-earnings (P/E) ratio of 17.21 as of 31 Dec 2023 (the data set that I had used for my initial analysis before the purchase), plus the recent debt-to-equity (D/E) of 69.71% and a current ratio of 1.53, the numbers are more befitting for a Singaporean company than an American one. However, in terms of its revenue and earnings per share (EPS) IP has rather been undulating, with good figures showing in years ending 2021 and 2022, only to go down in 2023 and now slowly recovering towards end of 2024. Same goes for its free cash flow, though they are still in the positive region.
On the financial statement level, IP is not as fundamentally robust as it seems since there are favourable and not-so-favourable variables. While on the safe side it is better not to consider this for investing, I am putting my neck out a bit on this one for its potential, i.e., the environmental factors and economic conditions levels of the Bedokian Portfolio’s fundamental analysis. As of now, IP’s market share in relative to its competitors, within the paper and paper products industry, and basic materials sector stood at around 11%, 67% and 13% respectively for the 12 months ending in the third quarter of 20241. Furthermore, while Amazon is flourishing in its other revenue sources, its traditional online retail channel is still currently the largest, and by association IP would benefit by supplying cartons and boxes for delivery means.
Going Forward
IP had clocked an impressive 62.74% rise year-to-date (YTD), more than some of the famous technology companies like Alphabet’s YTD of 20.97% and Apple’s YTD of 23.27% (as of 30 Nov 2024). However, I am looking at IP more towards at least mid-term, i.e. five years down the road. Its acquisition of DS Smith, a listed British packaging firm, would enhance IP’s already existing international presence. Also, price increases slated from 2025 of its products could bring in higher revenues2. Last but not least, the incoming American administration favours domestic manufacturing, so IP is for the moment at the right place and time.
All information and data are from Yahoo Finance unless otherwise stated.
Disclosure
Bought IP at:
USD 33.20 at Feb 2024
Reference
Business Insider. How The World’s Largest Paper Company Makes 1/3 of Cardboard Boxes In America | World Wide Waste. https://www.youtube.com/watch?v=_lsC0aXyY6g
1 – International Paper. CSI Market. https://csimarket.com/stocks/competitionSEG2.php?code=IP (accessed 30 Nov 2024)
2 – Rosengren, Cole. International Paper, Georgia-Pacific try for 2025 fiber price increases. Packaging Dive. 25 Nov 2024. https://www.packagingdive.com/news/international-paper-georgia-pacific-fiber-price-increase-2025/733824/#:~:text=Dive%20Brief%3A&text=International%20Paper%20announced%20a%20%2470,medium%20in%20its%20East%20region. (accessed 30 Nov 2024)
