When it comes to deciding whether a particular company goes into my ‘investment watchlist’, I will look at a few things:

• Whether the company’s business is one I am able to understand;
• Over a period of at least 5 years, the company must have a stable growth in financial performance, have little or no debt (and at the same time, be in a net cash position);
• In the same time period, the company should also record an improvement in its dividend payout to shareholders.

Does the US-listed Amcor plc (NYSE:AMCR) fulfil the 3 things listed above?

Let us find out in this article, together with whether its current traded price (at the time of writing) is considered to be ‘cheap’ or ‘expensive’ when compared against its 5-year average valuations, together with my ‘fair value’ price of the company:

What does Amcor plc Do?

Listed on both the New York Stock Exchange (under the ticker symbol NYSE:AMCR), as well as the Australia Stock Exchange (under the ticker symbol ASX:AMC), Amcor plc is a global leader in developing and producing responsible packaging for food, beverage, pharmaceutical, medical, home, personal care, and other products.

A List of Products by Amcor plc – Image Source: Amcor.com

The company reports its businesses under 2 segments:

(i) Flexibles Segment – It is involved in the developing and supplying of flexible packaging globally. It is one of the world’s largest suppliers of plastic, aluminium, and fibre-based packaging. The business segment accounted for approximately 76% of the company’s revenue for the financial year ended 30 June 2023 (i.e., FY2022/23);

(ii) Rigid Packaging Segment – This business segment manufactures rigid packaging containers and related products in the Americas (North & South America). It accounted the remaining 24% of the company’s revenue for the financial year ended 30 June 2023 (i.e., FY2022/23).

Some of the company’s customers (to my understanding) are well-known brands including Unilever, Nestle, Mondelez, PepsiCo, as well as The Coca-Cola Company.

In my opinion, Amcor plc’s business operations is one that is easy to understand, hence it ticks the first criteria of mine (as described in the introductory paragraph).

Financial Performance of Amcor plc between FY2018/19 and FY2022/23

Next, let us have a look at the company’s financial performances recorded in the last 5 years – between FY2018/19 ended 30 June 2019 and FY2022/23 ended 30 June 2023; it has a financial year ending every 30 June.

In this section, I will be focusing on Amcor plc’s total revenue and net profit, gross and net profit margin, as well as its return on equity:

Total Revenue & Net Profit:

	FY 2018/19	FY 2019/20	FY 2020/21	FY 2021/22	FY 2022/23
Total Revenue (US$’mil)	$9,458m	$12,468m	$12,861m	$14,544m	$14,694m
Net Profit (US$’mil)	$430m	$612m	$939m	$805m	$1,048m

Amcor plc’s total revenue saw year-on-year (y-o-y) improvements every single year, and growing at a compound annual growth rate (CAGR) of 9.2% over a 5-year period.

For its net profit, apart from a slight 14% dip in FY2021/22, the remaining 4 years saw the company’s net profit recording an improvement compared to the year before. In terms of its CAGR, it is at a good 19.5%.

Gross & Net Profit Margins:

The following table is Amcor plc’s gross and net profit margins I have computed:

	FY 2018/19	FY 2019/20	FY 2020/21	FY 2021/22	FY 2022/23
Gross Profit Margin (%)	19.0%	20.3%	21.2%	19.4%	18.5%
Net Profit Margin (%)	4.5%	4.9%	7.3%	5.5%	7.1%

After peaking at 21.2% in FY2020/21 (which is also the highest in the 5-year period I have looked at), Amcor’s gross profit margin fell in the 2 years thereafter. Also, at 18.5% recorded in the latest financial year under review (i.e., FY2022/23), it is the lowest in 5 years, and something I will keep a close watch on in the coming financial year to see if it continues to slide.

On the other hand, Amcor’s net profit margin saw an upward climb every single year, except for in FY2021/22, where its net profit dipped by 14%.

Return on Equity (RoE):

For the benefit of those who are new to this financial metric, it is basically a calculation of a company’s ability to generate profits (in percentage terms) for every dollar of shareholders’ money it uses in its businesses.

When evaluating this financial metric, my preference is towards companies that are able to record a return on equity of 15.0% or more over the years.

The following table is Amcor plc’s Return on Equity which I have computed:

	FY 2018/19	FY 2019/20	FY 2020/21	FY 2021/22	FY 2022/23
Return on Equity (%)	7.7%	13.2%	19.7%	19.7%	26.0%

The company’s gradual climb in its return on equity every single year (from a low of just 7.7% in FY2018/19 to a high of 26.0% in FY2022/23 – which is also the highest in 5 years) is a desirable one.

Debt Profile of Amcor plc between FY2018/19 and FY2022/23

In light of the current high interest rate environment (no doubt the US Federal Reserve have signalled rate cuts in 2024, but it is extremely unlikely we will return to the ultra low interest rates anytime soon), a company’s debt profile is more closely watched by investors – where many would prefer to invest in one that have little or not debt, and at the same time, be in a net cash position (myself included).

With that in mind, let us take a look at Amcor’s debt profile recorded over the last 5 years (between FY2018/19 and FY2022/23) in the table below:

	FY 2018/19	FY 2019/20	FY 2020/21	FY 2021/22	FY 2022/23
Cash & Cash Equivalents (US$’mil)	$602m	$743m	$850m	$775m	$689m
Total Borrowings (US$’mil)	$6,103m	$6,234m	$6,289m	$6,490m	$6,746m
Net Cash/ Debt (US$’mil)	-$5,501m	-$5,491m	-$5,439m	-$5,715m	-$6,057m

One thing to note about its debt profile in the most recent 3 years (between FY2020/21 and FY2022/23) is that it has worsened – due to a decline in its cash and cash equivalents, and at the same time, an increase in its total borrowings.

Despite of that, the company have managed to maintain its current ratio at 1.1 – 1.2 over the last 5 years, suggesting it is able to fulfil any short-term debt obligations if required.

Dividend Payout to Shareholders between FY2018/19 and FY2022/23

Shareholders of Amcor plc will receive a dividend payout on a quarterly basis (if you are an income investor looking for companies that pays out a regular dividend, then this company is one you can have a look at), and the following is its dividend payout over the last 5 financial years:

	FY 2018/19	FY 2019/20	FY 2020/21	FY 2021/22	FY 2022/23
Dividend Per Share (US$)	$0.24	$0.46	$0.47	$0.48	$0.49

Between FY2020/21 and FY2022/23, Amcor’s dividend payout have increased by around 2.1%. Also, over the last 5 years, its dividend payout have grown by a CAGR of 15.3% (much of it can be attributed to a 92% jump in its dividend payout in FY2019/20 – due to the fact that for the year FY2019/20, shareholders only received dividends twice instead of four times in the subsequent years).

Is the Current Traded Price of Amcor plc Considered ‘Cheap’ or ‘Expensive’?

What I will normally do to find out whether the current traded price of a company is considered to be ‘cheap’ or ‘expensive’ is to take its current valuations (based on its current traded price) and compare them against its average valuations.

At the time of writing this article (14 Feb 2024), Amcor plc is trading at US$8.95. Here’s a comparison of its current valuations (based on its current traded price) against its 5-year average:

	Current	5-Year Average
P/S Ratio	0.9	1.4
P/B Ratio	3.3	3.7
Dividend Yield	5.5%^^	3.9%

Looking at the above, as its current P/S (Price-to-Sales) and P/B (Price-to-Book) Ratios are lower compared to its 5-year average, coupled with its current dividend yield being higher than its 5-year average, I would say the current traded price of Amcor plc is considered to be ‘cheap’.

Finally, based on my computations from its 5-year average valuations, my ‘fair value’ price of Amcor plc is at $12.58 – compared against its current traded price of $8.95, it is trading at a 28.9% discount.

Closing Thoughts

Coming back to the 3 things I look at when I study a company before determining if it is a possible ‘buy’:

• The company, which is in the business of manufacturing product packaging, is one that is easy to understand;
• As far as the company’s financial performance goes, it has recorded a stable growth in its total revenue and net profit, as well as in its return on equity over the last 5 years. Dividend payouts have also saw a stable climb over the years (by about 2.1% every year). The only slight negative is its gross profit margin, which have recorded successive years of decline in the most recent 3 years;
• Finally, the company being in a net debt position (and at the same time, its net debt position worsened in the most recent 3 years) is definitely a negative. However, its current ratio has been maintained at above 1.0, suggesting it is able to fulfil any short-term debt obligations if need be.

Last but not least, based on my ‘fair value’ price of $12.58 (which I computed using the company’s 5-year average valuations), its current traded price of $8.95 means that the company is currently trading at a 28.9% discount.

With that, I have come to the end of my analysis of the product packaging manufacturer Amcor plc. I hope the contents above have given you a good understanding of the dual-listed company. Do take note that everything you have just read above is purely for educational purposes only, and they do not represent any buy or sell calls for the company. You should always do your own due diligence before you make any investment decisions.

Disclaimer: At the time of writing, I am not invested in Amcor plc.

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