Top 5 paper stocks to watch in Q2: ITP, MERC, PKG, GPK & WRK

Highlights 

• Packaging Corporation of America (NYSE:PKG) has a P/E ratio of 16.21, with an annualized dividend of US$4.0.
• Westrock Company’s (NYSE:WRK) dividend yield is 1.87%, and the P/E ratio is 17.05.
• Graphic Packaging Holding Company (NYSE:GPK) has a P/E ratio of 24.73 and a dividend yield of 1.38%.

The paper and packaging industry comprises companies specializing in paper, packaging, and pulp products. Due to growing e-commerce, demand for packaging paper has increased manifold. These companies also run paper mills. Paper is used in various industries, from food & beverage, utility, and hospitality to education. Paper was first produced in China using a pulp made from hemp, bark, and water. Although people originally used paper to record information, its use for other purposes increased with time.

Here we discuss five paper stocks that returned 60% gains year-to-date. 

IT Tech Packaging, Inc. (AMEX: ITP)

Closing price on May 9, 2022: US$0.3742
Market capitalization: US$35.7 million

IT Tech Packaging Inc is a holding company engaged in paper manufacturing. The China-based company produces three products: packaging paper, printing paper, and tissue paper. 

For the fiscal ended December 31, 2021, the company reported revenue of US$160.88 million, a 59.4% increase YoY, compared to US$100.94 million in fiscal 2020.

Its net income came in at US$0.91 million or US$0.02 per share diluted, compared to a net loss of US$5.55 million or US$0.21 per share diluted in the previous fiscal.  

Its cash, cash equivalents and restricted cash were US$11.2 million as of December 31, 2021, an increase of US$7.06 million from US$4.14 million as of December 31, 2020.

The stock traded in the range of US$0.60 to US$0.16 in one year.

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Mercer International Inc. (NASDAQ:MERC)

Closing price on May 9, 2022: US$15.26
Market capitalization: US$993 million

British Columbia, Canada-based Mercer International Inc is into the pulp business. It produces the product called NBSK (northern bleached softwood kraft). 

The company reported revenue of US$592.7 million in the quarter ended March 31, an approximate 44% increase YoY, compared to US$412.7 million in the same quarter a year ago. Its net income was US$88.9 million or US$1.34 per share diluted compared to US$5.9 million or US$0.09 per share diluted in the March quarter of 2021. 

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It announced to pay a quarterly dividend of US$0.075 per share on July 7, 2022, to all the shareholders of record on June 29, 2022. The stock traded in the range of US$17.17 to US$9.51 in the last 52 weeks. It has a P/E ratio of 3.93, and the forward P/E for one year is 4.58. MERC has a dividend yield of 1.9%, with an annualized dividend of US$0.30.

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Packaging Corporation of America (NYSE:PKG)

Closing price on May 9, 2022: US$160.78
Market capitalization: US$14.86 billion

Lake Forest, Illinois-based Packaging Corp is one of the US's largest containerboard and corrugated packaging manufacturer. The company is focused on individual retail customers and has three reportable segments: Packaging, Paper, Corporate and Other. 

For the quarter ended March 31, 2022, it reported a net income of US$254.2 million or US$2.70 per share diluted on the net sales of US$2.14 billion.

The PKG stock traded in the range of US$168.50 to US$124.78 in the last 52 weeks. It has a P/E ratio of 16.21, and the forward P/E for the year is 13.79. PKG has a dividend yield of 2.46%, with an annualized dividend of US$4.0. 

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Westrock Company (NYSE:WRK)

Closing price on May 9, 2022: US$44.19
Market capitalization: US$13.28 billion 

The Atlanta, Georgia-based company manufactures corrugated and consumer packaging products, including paperboard and folding cartons. Its primary revenue comes from Corrugated Packaging.

Westrock reported net sales of US$5.38 billion for the March quarter of 2022, reflecting an increase of 21.3% YoY, compared to the net sales of US$4.44 billion in the same quarter the previous year. The net income came in at US$40 million or US$0.15 per share diluted, a decline of around 64.5%, compared to US$112.5 million in the previous year. The earnings per share diluted were US$0.42 for the March quarter of 2021. 

The stock traded in the range of US$62.03 to US$40.78. It has a P/E ratio of 17.05, and the forward P/E for the year is 10.45. The stock has a dividend yield of 1.87%, with an annualized dividend of US$1.0.

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Graphic Packaging Holding Company (NYSE:GPK)

Closing price on May 9, 2022: US$21.1
Market capitalization: US$6.48 billion

Graphic Packaging Holding Co manufactures and sells paper-based consumer packaging products through its subsidiaries. The company is based in Atlanta, Georgia.

The company reported net sales of US$2.25 billion for the quarter ended March 31, 2022, compared to US$1.65 billion for the same quarter in 2021. Its net income attributable to the company was US$107 million or US$0.35 per share diluted compared to US$54 million or US$0.19 per share diluted in the March quarter of 2021.   

The stock traded in the range of US$22.71 to US$16.94 in the last 52 weeks. It has a P/E ratio of 24.73, and the forward P/E for the year is 9.91. GPK has a dividend yield of 1.38% and an annualized dividend of US$0.30.

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Bottom line:

Paper is produced in large quantities around the world every year. It is low cost, biodegradable, and recyclable, thus, making it an ideal product for a variety of use, including packaging. However, investors should exercise due diligence before investing in the stock market.