Sealed Air Corp (NYSE:SEE)
Sealed Air Corp (NYSE:SEE) produces food safety products like the plastic wrap that protects meat you buy at the grocery as well as packaging products like bubble wrap.
While the company’s product portfolio may not attract investors looking to invest with a conscience spelled it right here, their values and corporate culture certainly will. The company’s vision is “to create a better way for life” and it pursues this mission through its “Smart Life” initiative for achieving sustainability.
In 2012 Forbes ranked Sealed Air Corp (NYSE:SEE) in the top 10 of “World’s Most Admired Companies” and it was #2 in its industry in Newsweek’s 2012 Green Rankings. Obviously it’s an admirable company, but how is the actual business doing?
Back in 2012 things were looking pretty nasty. In the third quarter the company announced a $1.2 billion impairment against its acquisition of Diversey, a producer of cleaning and sanitation products. The total impairment charges for the acquisition totaled $1.8 billion by year end. Since then the stock has rebounded nicely, doubling in value since late 2012. Despite the run, the stock still trades at 0.7x sales. Management estimates Fiscal Year (FY) 2013 earnings to be within $1.10 to $1.20 giving the stock a forward Price/Earnings (P/E) multiple in the low to mid 20’s.
That’s pricey for a company that is barely growing sales, although the company is undertaking a major cost cutting initiative to “improve the quality of earnings”. So in the end even though sales may not be growing at a healthy rate in the short term the net income may still be propped up by cutting expenses. Another major concern for me is the debt picture. The company has $5 billion in debt, over 3.5x the $1.4 billion in shareholder equity. In the first quarter of 2013 the company reported $130 million in operating profit and $91 million in interest expenses. That’s a very heavy debt burden. I would want to see the company get a better control over their finances before I considered investing.
Investing with soul
Of the three companies discussed in this article I would add The Female Health Company (NASDAQ:FHCO) and Xylem Inc (NYSE:XYL) to my watch list. Sealed Air Corp (NYSE:SEE)’s debt situation and questionable acquisition strategy have scared me away for now.
All three have phenomenal growth opportunities in emerging markets. Whether it’s female condoms, improved water systems, or food sanitation and hygiene, the growth is going to come from developing countries. With this opportunity comes great risk, though. I believe it will be a rocky road over the next few years as global markets slowly recover, but I the long term major investments in the infrastructure and quality of life in emerging markets will reward these companies handsomely.
The article Invest With Your Conscience originally appeared on Fool.com and is written by Stephen Benz.
Stephen Benz has no position in any stocks mentioned. The Motley Fool owns shares of Sealed Air. Stephen is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
