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Trade-Ideas: KapStone Paper And Packaging Corporation (KS) Is Today's "Perilous Reversal" Stock

Stocks in this article: KS

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified KapStone Paper And Packaging Corporation ( KS) as a "perilous reversal" (up big yesterday but down big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified KapStone Paper And Packaging Corporation as such a stock due to the following factors:

  • KS has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $17.5 million.
  • KS has traded 48,934 shares today.
  • KS is down 3.1% today.
  • KS was up 9.3% yesterday.

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More details on KS:

KapStone Paper and Packaging Corporation engages in the production, sale, and export of unbleached kraft paper products and corrugated products in the United States and internationally. KS has a PE ratio of 31.8. Currently there are 6 analysts that rate KapStone Paper And Packaging Corporation a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for KapStone Paper And Packaging Corporation has been 343,900 shares per day over the past 30 days. KapStone Paper And Packaging has a market cap of $2.2 billion and is part of the consumer goods sector and consumer non-durables industry. The stock has a beta of 1.16 and a short float of 5.4% with 5.27 days to cover. Shares are up 103.4% year to date as of the close of trading on Monday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates KapStone Paper And Packaging Corporation as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, solid stock price performance, growth in earnings per share and increase in net income. We feel these strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value.

Highlights from the ratings report include:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 9.3%. Since the same quarter one year prior, revenues slightly increased by 6.5%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The current debt-to-equity ratio, 0.55, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.99 is somewhat weak and could be cause for future problems.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 112.39% over the past year, a rise that has exceeded that of the S&P 500 Index. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • KAPSTONE PAPER & PACKAGING has improved earnings per share by 12.8% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, KAPSTONE PAPER & PACKAGING reported lower earnings of $1.32 versus $2.61 in the prior year. This year, the market expects an improvement in earnings ($2.68 versus $1.32).
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Paper & Forest Products industry average, but is greater than that of the S&P 500. The net income increased by 14.1% when compared to the same quarter one year prior, going from $18.40 million to $20.99 million.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

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