Quick Value 1.11.21 ($ATR)
Packaging superstar -- AptarGroup Inc $ATR
Yet another big week in the markets with fresh all-time-highs all around.
There were notable jumps in both the 10-year yield and oil prices over the past week.
Rates are more than 2x off lows earlier this year but still 0.5-1.0% below where they were for most of 2019…
Crude oil prices have nearly fully recovered from the year 2020…
Time to stop complaining about value vs. growth… Over the past 6 months, value stocks have outpaced growth stocks in
And small stocks (Russell 2000) are up nearly 50% over the 6-month period!
AptarGroup Inc ($ATR)
Trying something new this week and piggybacking off last week’s post on Amcor… As a reminder, Amcor is coming off a big acquisition (Bemis in June 2019), trades at ~16-18x earnings and is shooting for 10-15% earnings growth via buybacks, acquisitions, and organic growth.
AptarGroup is a competitor in the packaging industry with more exposure to pharmaceuticals, injectables, drug dispensing (but still a player in food & bev, consumer goods, etc.).
The key difference with Amcor lies in the pharma division which has insanely good margins with it… This segment has also been a growth machine with sales climbing from ~$800m in 2018 to $1.2bn over the past 12 months — a 17% annual growth rate.
Since 2017, Aptar generated ~$1.5bn in operating cash flow… They spent:
$783m on capex (~40% of cash uses)
$800m on acquisitions (42% of cash use)
$320m on dividends (17% of cash use)
$0 (net) on share repurchases (after accounting for stock issuance)
$215m net borrowed (source of cash)
At $140/share, Aptar is a $9bn market cap and a $10bn enterprise value with 2021 estimated EBITDA of $650m (15.4x multiple) and EPS of $4.10 (34x earnings).
Definitely a higher multiple than Amcor but the crown jewel here (pharma segment) might be worth the premium with 35-40% EBITDA margins and double-digit revenue growth. This post isn’t designed to cover why this crown jewel might be so valuable but it’s a great starting point for anyone digging into this industry and uncovers the surface-level differences from Amcor.
Next week we’ll take a look at another player in the packaging space…