NEW YORK (TheStreet) -- Shares of KapStone Paper and Packaging Corp. (KS) are higher by 2.79% to $31 in pre-market trading on Monday, following a ratings upgrade to "buy" from "hold" at Deutsche Bank (DB) .
The firm said it raised its rating on the company, which manufactures and sells kraft paper and corrugated products for industrial and consumer markets, based on its belief KapStone has significant levers for earnings growth.
Deutsche Bank upped its price target on the stock to $36 from $26.
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"We rate KAPSTONE PAPER & PACKAGING (KS) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its robust revenue growth, notable return on equity, good cash flow from operations, solid stock price performance and impressive record of earnings per share growth. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
Separately, TheStreet Ratings team rates KAPSTONE PAPER & PACKAGING as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:
- KS's very impressive revenue growth greatly exceeded the industry average of 2.2%. Since the same quarter one year prior, revenues leaped by 80.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Powered by its strong earnings growth of 140.90% and other important driving factors, this stock has surged by 38.03% over the past year, outperforming the rise in the S&P 500 Index during the same period. Turning to the future, naturally, any stock can fall in a major bear market. However, in almost any other environment, the stock should continue to move higher despite the fact that it has already enjoyed nice gains in the past year.
- KAPSTONE PAPER & PACKAGING reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, KAPSTONE PAPER & PACKAGING increased its bottom line by earning $1.32 versus $0.66 in the prior year. This year, the market expects an improvement in earnings ($2.18 versus $1.32).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Paper & Forest Products industry. The net income increased by 145.1% when compared to the same quarter one year prior, rising from $20.99 million to $51.46 million.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. In comparison to the other companies in the Paper & Forest Products industry and the overall market, KAPSTONE PAPER & PACKAGING's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
- You can view the full analysis from the report here: KS Ratings Report
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