Thinking of environmentally-friendly stock picks to mark Earth Day, which was recently observed in April? An inspiration from the familiar school poem “Trees” by Joyce Kilmer could very well be in order and, at the same time, you could have an Arbor Day celebration thrown in.
Picks that could rank high among probable choices in this regard are those companies pursuing sustainability in the utilization of our planet’s paper resources through recycling. Their green efforts can best be appreciated knowing that each ton of recycled paper is approximately equal to saving 17 trees, something which should elate poet Kilmer’s spirit.
Unthinkable for a world entirely paperless
Moreover, from an investing standpoint, opportunities in the paper-making and paper-recycling industries remain potent. In all appearances, our world isn’t bound to go entirely paperless. Going wholly without paper, even with today’s modern technologies, remains a distant reality for both homes and offices.
Notably, according to an industry report by the Environmental Paper Network, paper manufacturing will remain a major industry for the foreseeable future. The challenge most critical and pressing for industry players, the report indicated, is the sustainable use of the earth’s natural resources in paper making.
Equipping paper recyclers
Kadant Inc. (NYSE:KAI) is one environment-friendly stock pick if we’re to go by this parameter. Besides being a global supplier of paper-making and paper-recycling equipment, it also manufactures granules, using paper-making pulp fiber byproducts as raw materials.
Another strong probable choice is Boise Inc. (NYSE:BZ) whose corporate values include running its business of manufacturing packaging and paper products in a sustainable manner. Headquartered in Idaho, the company has plants across the U.S., including paper mills in the South, Midwest, and West. It also has operations in Canada, Mexico, Spain, France, and the Netherlands.
Environment-friendly paper choices
Boise Inc. (NYSE:BZ) prides itself as one of North America’s biggest producers of recycled cut-size office papers, thus offering environment-friendly options to consumers. Enjoying steady paper sales volumes, the company’s paper segment generated close to $1.5 billion sales in 2012. Notably, sales of Boise ASPEN recycled paper support funding for national programs on the transformation of distressed urban areas into community parks.
Admirable environmental corporate policies are also a source of pride for diversified computer systems manufacturer Hewlett-Packard Company (NYSE:HPQ). In the industry, for instance, the company’s paper policy is touted as one of the most comprehensive. The company’s papers are not only sustainably-sourced and responsibly manufactured but are also easily recycled.
Admiring and investing
Based on current company conditions, however, the most that Hewlett-Packard Company (NYSE:HPQ) could hope for from environment-conscious investors is just that—admiration of its green policies. Slumping PC sales and weak turnover of servers appear to be reversing the turnaround of the company early this year following its restructuring, says one analysis. An $0.82 diluted EPS in the 2013 first quarter, down 11% from a year earlier though over the company’s $0.68 to $0.71 guidance, doesn’t seem too impressive.
Boise Inc. (NYSE:BZ)’s side of the pasture, on the other hand, looks greener. In the 2012 fourth quarter, the company’s net income rose to $13.5 million or $0.13 per diluted share from year-ago net income of $16.3 million or $0.15 per diluted share.
The same verdant look is on Kadant Inc. (NYSE:KAI), which reported $7 million in cash flow from its continuing operations in the 2013 first quarter, a significant increase from the $4 million negative cash flow in the year-earlier period. It also received $90 million bookings in the 2013 first quarter, up 16% from a year ago. Diluted EPS for the quarter amounted to $0.47, exceeding the company’s $0.32 to $0.34 guidance.
Kilmer’s final choice for the lovelier tree
Initiating action on either Boise Inc. (NYSE:BZ) or Kadant seems warranted, given their robust metrics, in addition to their strong market and industry presence. Several analysts, in fact, have buy ratings on both stocks.
Boise, which has a 52-week range of $6.39 to $9.18 and which is trading in the $7.66 to $8.85 band in April, has a P/E ratio of about 15.4. The cheaper option is Kadant Inc. (NYSE:KAI) with its 9.9 P/E ratio.
It traded between $24.15 and $26.98 throughout much of April and has a 52-week high/low of $28.74 and $20.50, respectively. Hence, if value investing had been Joyce Kilmer’s forte too, in addition to poetry, Kadant could be his pick for the lovelier tree.
The article Seizing the Opportunity in Paper originally appeared on Fool.com.
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