Intrinsic value of Packaging of America - PKG

Previous Close

$118.36

  Intrinsic Value

$242.78

stock screener

  Rating & Target

str. buy

+105%

  Value-price divergence*

+346%

Previous close

$118.36

 
Intrinsic value

$242.78

 
Up/down potential

+105%

 
Rating

str. buy

 
Value-price divergence*

+346%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of PKG stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 11.2

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  0.64
  11.80
  11.12
  10.51
  9.96
  9.46
  9.02
  8.61
  8.25
  7.93
  7.63
  7.37
  7.13
  6.92
  6.73
  6.56
  6.40
  6.26
  6.13
  6.02
  5.92
  5.83
  5.74
  5.67
  5.60
  5.54
  5.49
  5.44
  5.40
  5.36
  5.32
Revenue, $m
  5,779
  6,461
  7,179
  7,934
  8,724
  9,549
  10,410
  11,307
  12,240
  13,210
  14,219
  15,267
  16,356
  17,488
  18,664
  19,888
  21,161
  22,485
  23,865
  25,302
  26,799
  28,361
  29,990
  31,690
  33,465
  35,320
  37,259
  39,285
  41,405
  43,622
  45,943
Variable operating expenses, $m
 
  1,212
  1,339
  1,472
  1,611
  1,757
  1,908
  2,066
  2,231
  2,402
  2,580
  2,690
  2,882
  3,082
  3,289
  3,505
  3,729
  3,963
  4,206
  4,459
  4,723
  4,998
  5,285
  5,585
  5,898
  6,224
  6,566
  6,923
  7,297
  7,688
  8,097
Fixed operating expenses, $m
 
  4,104
  4,207
  4,312
  4,420
  4,530
  4,643
  4,759
  4,878
  5,000
  5,125
  5,254
  5,385
  5,520
  5,658
  5,799
  5,944
  6,093
  6,245
  6,401
  6,561
  6,725
  6,893
  7,066
  7,242
  7,423
  7,609
  7,799
  7,994
  8,194
  8,399
Total operating expenses, $m
  4,999
  5,316
  5,546
  5,784
  6,031
  6,287
  6,551
  6,825
  7,109
  7,402
  7,705
  7,944
  8,267
  8,602
  8,947
  9,304
  9,673
  10,056
  10,451
  10,860
  11,284
  11,723
  12,178
  12,651
  13,140
  13,647
  14,175
  14,722
  15,291
  15,882
  16,496
Operating income, $m
  780
  1,144
  1,634
  2,150
  2,693
  3,262
  3,858
  4,481
  5,131
  5,808
  6,514
  7,323
  8,088
  8,886
  9,718
  10,584
  11,488
  12,430
  13,414
  14,442
  15,515
  16,638
  17,811
  19,040
  20,326
  21,672
  23,084
  24,563
  26,114
  27,741
  29,448
EBITDA, $m
  1,138
  1,551
  2,077
  2,632
  3,216
  3,828
  4,468
  5,137
  5,835
  6,562
  7,320
  8,109
  8,931
  9,787
  10,679
  11,608
  12,577
  13,588
  14,643
  15,745
  16,895
  18,098
  19,356
  20,672
  22,049
  23,491
  25,002
  26,586
  28,246
  29,987
  31,814
Interest expense (income), $m
  88
  92
  109
  126
  144
  163
  183
  204
  226
  248
  272
  296
  321
  348
  375
  403
  433
  464
  496
  529
  563
  600
  637
  677
  718
  761
  805
  852
  901
  952
  1,006
Earnings before tax, $m
  689
  1,052
  1,525
  2,024
  2,549
  3,099
  3,675
  4,277
  4,905
  5,560
  6,242
  7,027
  7,767
  8,539
  9,343
  10,181
  11,055
  11,967
  12,919
  13,913
  14,952
  16,038
  17,174
  18,363
  19,608
  20,912
  22,278
  23,711
  25,213
  26,789
  28,442
Tax expense, $m
  239
  284
  412
  546
  688
  837
  992
  1,155
  1,324
  1,501
  1,685
  1,897
  2,097
  2,305
  2,523
  2,749
  2,985
  3,231
  3,488
  3,756
  4,037
  4,330
  4,637
  4,958
  5,294
  5,646
  6,015
  6,402
  6,808
  7,233
  7,679
Net income, $m
  450
  768
  1,113
  1,477
  1,861
  2,262
  2,683
  3,122
  3,581
  4,059
  4,557
  5,129
  5,670
  6,233
  6,820
  7,432
  8,070
  8,736
  9,431
  10,156
  10,915
  11,708
  12,537
  13,405
  14,314
  15,266
  16,263
  17,309
  18,406
  19,556
  20,763

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  239
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  5,777
  6,189
  6,877
  7,599
  8,356
  9,147
  9,971
  10,830
  11,724
  12,653
  13,619
  14,623
  15,666
  16,751
  17,878
  19,050
  20,269
  21,538
  22,859
  24,235
  25,670
  27,165
  28,726
  30,354
  32,055
  33,832
  35,688
  37,629
  39,660
  41,784
  44,007
Adjusted assets (=assets-cash), $m
  5,538
  6,189
  6,877
  7,599
  8,356
  9,147
  9,971
  10,830
  11,724
  12,653
  13,619
  14,623
  15,666
  16,751
  17,878
  19,050
  20,269
  21,538
  22,859
  24,235
  25,670
  27,165
  28,726
  30,354
  32,055
  33,832
  35,688
  37,629
  39,660
  41,784
  44,007
Revenue / Adjusted assets
  1.044
  1.044
  1.044
  1.044
  1.044
  1.044
  1.044
  1.044
  1.044
  1.044
  1.044
  1.044
  1.044
  1.044
  1.044
  1.044
  1.044
  1.044
  1.044
  1.044
  1.044
  1.044
  1.044
  1.044
  1.044
  1.044
  1.044
  1.044
  1.044
  1.044
  1.044
Average production assets, $m
  3,183
  3,560
  3,956
  4,372
  4,807
  5,262
  5,736
  6,230
  6,744
  7,279
  7,834
  8,412
  9,012
  9,636
  10,284
  10,958
  11,660
  12,389
  13,149
  13,941
  14,766
  15,627
  16,524
  17,461
  18,439
  19,461
  20,529
  21,646
  22,814
  24,036
  25,315
Working capital, $m
  1,071
  963
  1,070
  1,182
  1,300
  1,423
  1,551
  1,685
  1,824
  1,968
  2,119
  2,275
  2,437
  2,606
  2,781
  2,963
  3,153
  3,350
  3,556
  3,770
  3,993
  4,226
  4,468
  4,722
  4,986
  5,263
  5,552
  5,853
  6,169
  6,500
  6,846
Total debt, $m
  2,667
  3,106
  3,601
  4,122
  4,666
  5,236
  5,829
  6,448
  7,091
  7,760
  8,456
  9,179
  9,930
  10,710
  11,522
  12,366
  13,244
  14,157
  15,108
  16,099
  17,132
  18,209
  19,332
  20,505
  21,730
  23,009
  24,346
  25,743
  27,205
  28,734
  30,335
Total liabilities, $m
  4,017
  4,456
  4,951
  5,472
  6,016
  6,586
  7,179
  7,798
  8,441
  9,110
  9,806
  10,529
  11,280
  12,060
  12,872
  13,716
  14,594
  15,507
  16,458
  17,449
  18,482
  19,559
  20,682
  21,855
  23,080
  24,359
  25,696
  27,093
  28,555
  30,084
  31,685
Total equity, $m
  1,760
  1,733
  1,926
  2,128
  2,340
  2,561
  2,792
  3,032
  3,283
  3,543
  3,813
  4,095
  4,387
  4,690
  5,006
  5,334
  5,675
  6,031
  6,400
  6,786
  7,187
  7,606
  8,043
  8,499
  8,975
  9,473
  9,993
  10,536
  11,105
  11,699
  12,322
Total liabilities and equity, $m
  5,777
  6,189
  6,877
  7,600
  8,356
  9,147
  9,971
  10,830
  11,724
  12,653
  13,619
  14,624
  15,667
  16,750
  17,878
  19,050
  20,269
  21,538
  22,858
  24,235
  25,669
  27,165
  28,725
  30,354
  32,055
  33,832
  35,689
  37,629
  39,660
  41,783
  44,007
Debt-to-equity ratio
  1.515
  1.790
  1.870
  1.940
  1.990
  2.040
  2.090
  2.130
  2.160
  2.190
  2.220
  2.240
  2.260
  2.280
  2.300
  2.320
  2.330
  2.350
  2.360
  2.370
  2.380
  2.390
  2.400
  2.410
  2.420
  2.430
  2.440
  2.440
  2.450
  2.460
  2.460
Adjusted equity ratio
  0.275
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  450
  768
  1,113
  1,477
  1,861
  2,262
  2,683
  3,122
  3,581
  4,059
  4,557
  5,129
  5,670
  6,233
  6,820
  7,432
  8,070
  8,736
  9,431
  10,156
  10,915
  11,708
  12,537
  13,405
  14,314
  15,266
  16,263
  17,309
  18,406
  19,556
  20,763
Depreciation, amort., depletion, $m
  358
  407
  444
  482
  523
  566
  610
  656
  704
  754
  806
  786
  842
  901
  961
  1,024
  1,090
  1,158
  1,229
  1,303
  1,380
  1,460
  1,544
  1,632
  1,723
  1,819
  1,919
  2,023
  2,132
  2,246
  2,366
Funds from operations, $m
  800
  1,174
  1,557
  1,960
  2,384
  2,828
  3,293
  3,778
  4,285
  4,813
  5,363
  5,916
  6,512
  7,134
  7,781
  8,456
  9,160
  9,894
  10,660
  11,459
  12,295
  13,168
  14,081
  15,037
  16,037
  17,085
  18,182
  19,332
  20,538
  21,802
  23,129
Change in working capital, $m
  -1
  102
  107
  112
  118
  123
  128
  134
  139
  145
  150
  156
  162
  169
  175
  182
  190
  197
  206
  214
  223
  233
  243
  253
  265
  276
  289
  302
  316
  330
  346
Cash from operations, $m
  801
  1,073
  1,450
  1,847
  2,266
  2,705
  3,164
  3,645
  4,146
  4,668
  5,212
  5,759
  6,350
  6,965
  7,606
  8,274
  8,970
  9,696
  10,454
  11,245
  12,072
  12,935
  13,839
  14,784
  15,773
  16,808
  17,893
  19,030
  20,222
  21,472
  22,783
Maintenance CAPEX, $m
  0
  -297
  -333
  -370
  -409
  -449
  -492
  -536
  -582
  -630
  -680
  -732
  -786
  -842
  -901
  -961
  -1,024
  -1,090
  -1,158
  -1,229
  -1,303
  -1,380
  -1,460
  -1,544
  -1,632
  -1,723
  -1,819
  -1,919
  -2,023
  -2,132
  -2,246
New CAPEX, $m
  -285
  -377
  -396
  -416
  -435
  -455
  -474
  -494
  -514
  -535
  -556
  -577
  -600
  -624
  -648
  -674
  -701
  -730
  -760
  -792
  -825
  -860
  -898
  -937
  -978
  -1,022
  -1,068
  -1,117
  -1,168
  -1,222
  -1,279
Cash from investing activities, $m
  -770
  -674
  -729
  -786
  -844
  -904
  -966
  -1,030
  -1,096
  -1,165
  -1,236
  -1,309
  -1,386
  -1,466
  -1,549
  -1,635
  -1,725
  -1,820
  -1,918
  -2,021
  -2,128
  -2,240
  -2,358
  -2,481
  -2,610
  -2,745
  -2,887
  -3,036
  -3,191
  -3,354
  -3,525
Free cash flow, $m
  31
  398
  721
  1,062
  1,422
  1,801
  2,198
  2,614
  3,049
  3,503
  3,976
  4,450
  4,964
  5,499
  6,057
  6,639
  7,245
  7,877
  8,536
  9,225
  9,944
  10,695
  11,481
  12,302
  13,162
  14,063
  15,006
  15,995
  17,031
  18,118
  19,258
Issuance/(repayment) of debt, $m
  348
  466
  495
  520
  545
  569
  594
  618
  644
  669
  696
  723
  751
  781
  811
  844
  878
  914
  951
  991
  1,033
  1,077
  1,123
  1,173
  1,224
  1,279
  1,337
  1,398
  1,462
  1,529
  1,601
Issuance/(repurchase) of shares, $m
  -100
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  240
  466
  495
  520
  545
  569
  594
  618
  644
  669
  696
  723
  751
  781
  811
  844
  878
  914
  951
  991
  1,033
  1,077
  1,123
  1,173
  1,224
  1,279
  1,337
  1,398
  1,462
  1,529
  1,601
Total cash flow (excl. dividends), $m
  271
  864
  1,217
  1,582
  1,967
  2,370
  2,792
  3,233
  3,693
  4,172
  4,672
  5,173
  5,715
  6,280
  6,869
  7,482
  8,122
  8,790
  9,487
  10,216
  10,976
  11,772
  12,604
  13,475
  14,387
  15,342
  16,343
  17,392
  18,493
  19,647
  20,858
Retained Cash Flow (-), $m
  -127
  -185
  -193
  -202
  -212
  -221
  -231
  -240
  -250
  -260
  -270
  -281
  -292
  -304
  -316
  -328
  -341
  -355
  -370
  -385
  -402
  -419
  -437
  -456
  -476
  -497
  -520
  -544
  -568
  -595
  -622
Prev. year cash balance distribution, $m
 
  212
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  891
  1,024
  1,380
  1,755
  2,149
  2,561
  2,992
  3,442
  3,912
  4,401
  4,892
  5,423
  5,976
  6,553
  7,154
  7,781
  8,435
  9,117
  9,830
  10,575
  11,353
  12,167
  13,019
  13,911
  14,845
  15,823
  16,849
  17,924
  19,052
  20,236
Discount rate, %
 
  7.30
  7.67
  8.05
  8.45
  8.87
  9.32
  9.78
  10.27
  10.79
  11.32
  11.89
  12.49
  13.11
  13.77
  14.45
  15.18
  15.93
  16.73
  17.57
  18.45
  19.37
  20.34
  21.35
  22.42
  23.54
  24.72
  25.96
  27.25
  28.62
  30.05
PV of cash for distribution, $m
 
  830
  883
  1,094
  1,269
  1,405
  1,501
  1,557
  1,575
  1,556
  1,506
  1,421
  1,321
  1,205
  1,077
  944
  811
  683
  563
  454
  358
  276
  207
  152
  108
  75
  51
  33
  21
  13
  8
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Packaging Corporation of America (PCA) is a producer of containerboard products and uncoated freesheet. The Company operates through three segments: Packaging, Paper, and Corporate and Other. The Packaging segment produces a range of corrugated packaging products. The Paper segment manufactures and sells a range of papers, including communication-based papers and pressure sensitive papers. The Company's containerboard mills produces linerboard and semi-chemical corrugating medium, which are papers primarily used in the production of corrugated products. The Company's corrugated products manufacturing plants produce a range of corrugated packaging products, including conventional shipping containers used to protect and transport manufactured goods, multi-color boxes and displays. The Company also produces packaging for meat, fresh fruit and vegetables, processed food, beverages, and other industrial and consumer products.

FINANCIAL RATIOS  of  Packaging of America (PKG)

Valuation Ratios
P/E Ratio 24.8
Price to Sales 1.9
Price to Book 6.3
Price to Tangible Book
Price to Cash Flow 13.9
Price to Free Cash Flow 21.6
Growth Rates
Sales Growth Rate 0.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -12.8%
Cap. Spend. - 3 Yr. Gr. Rate 3.7%
Financial Strength
Quick Ratio 9
Current Ratio 0
LT Debt to Equity 150%
Total Debt to Equity 151.5%
Interest Coverage 9
Management Effectiveness
Return On Assets 9.2%
Ret/ On Assets - 3 Yr. Avg. 8.3%
Return On Total Capital 10.7%
Ret/ On T. Cap. - 3 Yr. Avg. 10.6%
Return On Equity 26.5%
Return On Equity - 3 Yr. Avg. 27.2%
Asset Turnover 1
Profitability Ratios
Gross Margin 22.1%
Gross Margin - 3 Yr. Avg. 21.4%
EBITDA Margin 19.6%
EBITDA Margin - 3 Yr. Avg. 18.2%
Operating Margin 13.5%
Oper. Margin - 3 Yr. Avg. 12.9%
Pre-Tax Margin 11.9%
Pre-Tax Margin - 3 Yr. Avg. 11.3%
Net Profit Margin 7.8%
Net Profit Margin - 3 Yr. Avg. 7.4%
Effective Tax Rate 34.7%
Eff/ Tax Rate - 3 Yr. Avg. 35%
Payout Ratio 48%

PKG stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PKG stock intrinsic value calculation we used $5779 million for the last fiscal year's total revenue generated by Packaging of America. The default revenue input number comes from 2016 income statement of Packaging of America. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our PKG stock valuation model: a) initial revenue growth rate of 11.8% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 7.3%, whose default value for PKG is calculated based on our internal credit rating of Packaging of America, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Packaging of America.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of PKG stock the variable cost ratio is equal to 18.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $4004 million in the base year in the intrinsic value calculation for PKG stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for Packaging of America.

Corporate tax rate of 27% is the nominal tax rate for Packaging of America. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the PKG stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for PKG are equal to 55.1%.

Life of production assets of 10.7 years is the average useful life of capital assets used in Packaging of America operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for PKG is equal to 14.9%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $1760 million for Packaging of America - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 94.599 million for Packaging of America is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Packaging of America at the current share price and the inputted number of shares is $11.2 billion.

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Financial statements of PKG
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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