Packaging Stock Could Have Post-Earnings Upside Potential

Graphic Packaging Holding Company (NYSE:GPK) is down 2.9% to trade at $20.47 at last check, despite company reporting better-than-expected first-quarter profits of 48 cents per share, as well as a revenue beat. The packaging name said it implemented pricing changes to offset high inflation, and maintained its 2022 guidance. However, broader market headwinds could be impacting the stock.

The equity earlier fell to its lowest level in nearly three weeks, and is now pacing for its third-straight daily drop. The shares are also slipping below the 20-day moving average, just days after hitting an April 21, record high of $22.25. Year-over-year, GPK is still up 11.4%.

Analysts are optimistic towards the security, with nine of the 13 in coverage carrying a "buy" or better rating, while four say "hold" or worse. Plus, GPK's 12-month consensus target price of $24.90 is a 21.8% premium to current levels.

Short-term options traders have been more put-biased than usual. This is per the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.83, which stands higher than 91% of readings from the past year. 

From a fundamental point of view, Graphic Packaging stock continues to offer decent potential as a value investment. GPK trades at a forward price-earnings ratio of 11.63, and a price-sales ratio of 0.90. The packaging company is also expected to generate substantial growth for the current fiscal year, with estimates indicating 24.1% revenue growth and 72.4% earnings growth, making its valuation more attractive in the short-term.

In addition, GPK's revenues and earnings are estimated to increase by 3.1% and 14.8% respectively in 2023. However, the company's weak balance sheet may be an issue in the long run, as the company currently holds $6.06 billion in total debt, and only $172 million in cash, which could reduce long-term profitability.