Markets
IP

Can International Paper (IP) Prove to be Suitable Value Pick?

An image of a calculator, a smartphone and a chart on a clip board
Credit: Shutterstock photo

Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn't want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?

One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let's put International Paper Inc.IP stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:

PE Ratio

A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock's current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.

On this front, International Paper has a trailing twelve months PE ratio of 19.8, as you can see in the chart below:

This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 stands at about 20.8. If we focus on the long-term PE trend, International Paper's current PE level puts it above its midpoint over the past five years, with the number having risen rapidly over the past few months.

Further, the stock's PE also compares favorably with the 's trailing twelve months PE ratio, which stands at 21.5. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.

Further, the stock's PE also compares favorably with the industry 's trailing twelve months PE ratio, which stands at 21.5. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.

We should also point out that International Paper has a forward PE ratio (price relative to this year's earnings) of just 17.1, so it is fair to say that a slightly more value-oriented path may be ahead for International Paper stock in the near term too.

P/S Ratio

Another key metric to note is the Price/Sales ratio. This approach compares a given stock's price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.

Right now, International Paper has a P/S ratio of about 1.1. This is a bit lower than the S&P 500 average, which comes in at 3.3x right now. Also, as we can see in the chart below, this is well below the highs for this stock in particular over the past few years, suggesting some level of undervalued trading-at least compared to historical norms.

">

International Paper Company Price and Consensus | International Paper Company Quote

This bearish trend is why the stock has just a Zacks Rank #3 (Hold) and why we are looking for in-line performance from the company in the near term.

Bottom Line

International Paper is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. With a formidable industry rank (among the Top 27%), International Paperlooks like a strong value contender. In fact, over the past one year, the industry has clearly outperformed the broader market, as you can see below:

So, value investors might want to wait for estimates and analyst sentiment to turn around in this name first, but once that happens, this stock could

4 Stocks to Watch after the Massive Equifax Hack

Cybersecurity stocks spiked on recent news of a data breach affecting 143 million Americans. But which stocks are the best buy candidates right now? And what does the future hold for the cybersecurity industry?

Equifax is just the most recent victim. Computer hacking and identity theft are more common than ever. Zacks has just released Cybersecurity! An Investor's Guide to inform Zacks.com readers about this $170 billion/year space. More importantly, it highlights 4 cybersecurity picks with strong profit potential.

Get the new Investing Guide now>>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

International Paper Company (IP): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

IP

Other Topics

Stocks

Latest Markets Videos

Zacks

Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

Learn More