Stock Pick of the Day for March 27, 2013

I haven’t done one of these in a while, but I felt compelled to do so given great value I found today. My stock pick for the day is Rock-Tenn Company (RKT) at $101.93. If you have never heard of them, that’s okay. I never heard of them myself until I ran a screener using some of Benjamin Graham’s value investing criterion (which I have touched on in the past and will write more about later)

What is Rock-Tenn Company? Rock-Tenn Company is a paper and packaging manufacturer and is one of North America’s top manufacturers of corrugated and consumer packaging. I know, it’s not a sexy technology company, but I have my reasons which I’ll explain below.

Rock-Tenn is a company that has had a three year average revenue and net income growth of 47.1% and 47.7%, respectively. In addition, they have a low debt to equity ratio, a current ratio of 2.01 (per their December 2013 quarterly filings), and a quick ratio of 0.94. In terms of debt, they have very low debt and have enough assets to cover future debt payments.

What really draws me to RKT is that it is extremely undervalued at this point in time. The price-to-earnings ratio is only 9.8. The PE Ratio for the previous five years for RKT has been 13.5 and the industry average today is 15.8. In addition, RKT has a price-to-book ratio of 1.7, which is below the industry average ratio of 2.9.

 

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