We came across a long thesis on Sealed Air Corp (NYSE:SEE) on ValueInvestorsClub by Fuego.Suave. In this article we will summarize the bulls’ thesis on SEE. The company’s shares were trading at $34.59 when this thesis was published, vs. closing price of $33.29 on Jan 2nd.
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Sealed Air Corp (NYSE:SEE) is a leading global provider of packaging solutions that integrate sustainable, high-performance materials, automation, equipment and services. The company designs, manufactures and delivers packaging solutions for a wide array of industries like foods, fluids and liquids, medical and life science, e-commerce retail, logistics and omnichannel fulfillment operations, and industrials.
The author’s bull thesis relies on the belief that recent macroeconomic challenges coupled with competitive pressures in the Protective segment have put SEE at a deeply undervalued level (currently trading at only 8.0x forward EV/EBITDA). At the same time, the author sees potential for improving macro conditions in 2025, which coupled with easier comps, could facilitate the Protective segment to return to at least 0% volume growth. More importantly, he argues that this segment is the weak link in the business and that a potential strategic reevaluation from management could lead to either the divesting or a complete restructuring of the segment (both events are seen as positive for growth and profitability). At the same time, the core Food segment (70%+ of total EBITDA) is the cash cow of the company and has a stronger competitive advantage as a market leader. The author sees a potential increase in production of chicken and beef, which would fuel demand for food packaging. One of the most appealing aspects of the Food business is its diversification across geographies and food types, which provides some level of recession resistance.
All in all, the author sees significant potential upside from both operational improvements and strategic moves – he uses a sum-of-parts valuation that yields a $49.00 target stock price, or 47% upside from the current market price. The target price is obtained by applying a 6.5x EV/EBITDA multiple to the company’s Protective segment and a 12.0x multiple (represents a premium to peer Amcor due to superior moat) to the Food segment.
While we acknowledge the potential of SEE as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than SEE but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.
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