Smurfit WestRock Stock To $33?
Our multi-factor assessment suggests that it may be time to sell SW stock. We have, overall, a pessimistic view of the stock, and a price of $33 may not be out of reach. We believe there is a near-equal mix of good and bad in SW stock given its overall Moderate operating performance and financial condition. Hence, despite its Moderate valuation, this makes the stock look Risky.
Below is our assessment:
| CONCLUSION | |
|---|---|
| What you pay: | |
| Valuation | Moderate |
| What you get: | |
| Growth | Strong |
| Profitability | Very Weak |
| Financial Stability | Weak |
| Downturn Resilience | N/A |
| Operating Performance | Moderate |
| Stock Opinion | Risky |
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Let’s get into details of each of the assessed factors but before that, for quick background: With $24 Bil in market cap, Smurfit WestRock provides innovative technology solutions to enhance business efficiency and drive growth across various industries.
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[1] Valuation Looks Moderate
| SW | S&P 500 | |
|---|---|---|
| Price-to-Sales Ratio | 0.8 | 3.4 |
| Price-to-Earnings Ratio | 32.1 | 25.0 |
| Price-to-Free Cash Flow Ratio | 30.0 | 21.1 |
This table highlights how SW is valued vs broader market. For more details see: SW Valuation Ratios
[2] Growth Is Strong
- Smurfit WestRock has seen its top line grow at an average rate of 55.9% over the last 3 years
- Its revenues have grown 89% from $16 Bil to $31 Bil in the last 12 months
- Also, its quarterly revenues grew 4.3% to $8.0 Bil in the most recent quarter from $7.7 Bil a year ago.
| SW | S&P 500 | |
|---|---|---|
| 3-Year Average | 55.9% | 5.6% |
| Latest Twelve Months* | 89.5% | 6.4% |
| Most Recent Quarter (YoY)* | 4.3% | 7.5% |
This table highlights how SW is growing vs broader market. For more details see: SW Revenue Comparison
[3] Profitability Appears Very Weak
- SW last 12 month operating income was $2.2 Bil representing operating margin of 7.0%
- With cash flow margin of 9.6%, it generated nearly $3.0 Bil in operating cash flow over this period
- For the same period, SW generated nearly $748 Mil in net income, suggesting net margin of about 2.4%
| SW | S&P 500 | |
|---|---|---|
| Current Operating Margin | 7.0% | 18.8% |
| Current OCF Margin | 9.6% | 20.7% |
| Current Net Income Margin | 2.4% | 12.9% |
This table highlights how SW profitability vs broader market. For more details see: SW Operating Income Comparison
[4] Financial Stability Looks Weak
- SW Debt was $14 Bil at the end of the most recent quarter, while its current Market Cap is $24 Bil. This implies Debt-to-Equity Ratio of 58.8%
- SW Cash (including cash equivalents) makes up $851 Mil of $46 Bil in total Assets. This yields a Cash-to-Assets Ratio of 1.9%
| SW | S&P 500 | |
|---|---|---|
| Current Debt-to-Equity Ratio | 58.8% | 20.2% |
| Current Cash-to-Assets Ratio | 1.9% | 7.2% |
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