Monday 6 October 2014

Analysis of Sonoco Products

Sonoco, an American packaging and design company

Company: Sonoco Products

ISIN US8354951027 | WKN 861171

Business: An American packaging producing and designing company. They have a broad range of pillars that they stand on and those are: Display & Packaging, Flexibles, Graphics Management, Material Handling, Metal Ends & Closures, Pallets, Paper & Adhesives, Plastics, Protective Packaging, Recycling, Reels & Spools, Retail Packaging, Rigid Paper Containers, Specialty Components, Temperature Assurance and finally they produce Tubes & Cores.

Active: They have operations ins 33 countries world wide and the brands that they service are being sold in 85 countries.

P/E: 18.5

This company was analysed due to a request on the Analysis Requests page.

contrarian values of P/E, P/B, ROE as well as dividend for Sonoco Products

The P/E of Sonoco products is too high for me with 18.5 and the P/B is also a little too high with 2.4 which gives us a no go according to Graham. The earnings to sales are at 5% which I find fair for the business and the ROE is also ok with 12.8%. The book to debt ratio is at 0.8 which is also that ok.
In the last five years they have had a yearly revenue growth of 6.2% which is excellent and this then gives us a motivated P/E value of 16 to 21 which means that Sonoco Products is fairly valued on the market today.
They pay a good dividend of 3.1% which on the other hand represents 58% of their earnings so they need to start to push up their earnings to be able to keep increasing their dividends.

Conclusion: Graham is saying directly no to this and I am less negative. Sonoco is a solid company with a long tradition and their sales of packages will grow with their customers sales of products. It might be that it is a good moment to step into Sonoco today for the long run but to me personally the P/E is too high.

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