Why Packaging Corp. of America (PKG) Could Reach $75

Story updated at 9:50 a.m. with market information.

NEW YORK (TheStreet) -- Shares of Packaging Corp. of America (PKG) could reach as high as $75 according to analyst firm DA Davidson.

Shares of Packaging Corp. of America gained 0.1% to $72.08 in morning trading Thursday.

The firm maintains its "neutral" rating for the company. The firm also raised its estimates for Packaging Corp, saying the company is now seeing "higher synergies."

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Separately, TheStreet Ratings team rates PACKAGING CORP OF AMERICA as a Buy with a ratings score of A+. TheStreet Ratings Team has this to say about their recommendation:

"We rate PACKAGING CORP OF AMERICA (PKG) 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 revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, good cash flow from operations and solid stock price performance. We feel these strengths outweigh the fact that the company shows low profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 2.7%. Since the same quarter one year prior, revenues rose by 16.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The debt-to-equity ratio is somewhat low, currently at 0.73, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. To add to this, PKG has a quick ratio of 2.31, which demonstrates the ability of the company to cover short-term liquidity needs.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. When compared to other companies in the Containers & Packaging industry and the overall market, PACKAGING CORP OF AMERICA's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
  • Powered by its strong earnings growth of 109.75% and other important driving factors, this stock has surged by 59.22% 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.
  • PACKAGING CORP OF AMERICA 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 year. We feel that this trend should continue. During the past fiscal year, PACKAGING CORP OF AMERICA increased its bottom line by earning $1.68 versus $1.58 in the prior year. This year, the market expects an improvement in earnings ($3.14 versus $1.68).
  • You can view the full analysis from the report here: PKG Ratings Report

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