Sonoco Products Co Is a Hidden Gem
Sonoco Products Co (NYSE:SON) stock is up 28% year-to-date. Sonoco might not be a familiar name, but the products the company packages are. If you happen to indulge in pre-packaged foods, such as chips or cookies, and noticed they have a new innovative easy-open, resealable package design, chances are that you have crossed paths with its product. The company is a global provider of a variety of diversified consumer and industrial packaging, operating 86 plants in 17 countries across five continents.
Just because Sonoco isn’t a media darling or even a name that’s touted by the financial media, that doesn’t mean SON stock is not a good investment. The truth is that it’s quite the contrary—it’s a hidden gem.
The following are three reasons investors may want to turn bullish on SON stock:
As part of its effort to grow its business through new products, markets, and services, Sonoco invested 12 million to build a new innovative packaging solutions research and development studio. The company’s dedication to research and development has produced numerous innovative products.
The following are examples of such products:
- The “Via Blood Transporter” used for the transport and storage of red blood cells and platelets ensures ultimate temperature protection. This product is part of Sonoco’s protective solutions product segment, which isn’t its largest but it does account for 10% of sales.
- On July 12, 2016, Sonoco’s “Thermosafe” division launched “The Certis Platform,” a line of three-day and five-day temperature-controlled packaging solutions for products that need specific temperature control. Sonoco is anticipating global growth in the shipments of pharmaceutical and biologics.
- The same day, the company announced the conclusion of three years of product development on a product called the “FlexSHIELD Barrier Coating.” The water-based coating allows takeout containers to be compostable without compromising barrier performance. It is an effective alternative to the standard white Styrofoam food container.
Sonoco is expanding its business through innovating existing products and creating new and exciting ones in the process. Its ability to foresee trends and invest in the future is a prime example of how innovation leads to growth—and this growth has rewarded SON stock investors.
2. Attractive Valuations
SON stock is not expensive from a valuation perspective. The company is current trading at a price-to-earnings multiple of 23.5, which is comparatively lower than the industry average multiple of 28.4. Sonoco stock would need to rise 20% just to match industry average.
The company’s financials are also compelling. Net sales in 2015 were $5.0 billion.
Furthermore, flexible packaging units raised operating profits by more than 21%, while net operating profits grew 35.3% to $46.0 million. Growth on both the top and bottom line is enticing to investors.
SON stock also pays a dividend that yields 2.87%. It is not a high yielder, but it does add value to an already compelling investment.
3. Bullish SON Stock Chart
The year is proving to be a profitable one for SON stock investors. The following chart points to further gains.
Chart courtesy of www.StockCharts.com
In mid-March, SON stock produced a golden cross on that chart. A golden cross is a bullish signal that is produced when a faster moving average (the 50-day moving average) crosses above a slower moving average (the 200-day moving average). Traders use this signal to confirm a bull market is approaching. Both moving averages are trending higher, which reaffirms the bullish stance.
SON stock has been trading in a consolidating range for a little more than three months. After numerous attempts, SON stock finally broke higher in July. The pattern points to a midpoint consolidation, and projects a price target of $57.00.
The Bottom Line on SON Stock
When I was an adolescent in high school, a gentleman wearing a bow tie was invited to speak about the merits of investing. His main argument involved investing in products you love to consume. If you love drinking “Coca-Cola,” then you should own a part of the company. Based on that premise, we consume Sonoco-packaged products on a daily basis, so SON stock should offer lots of upside.