IP
International Paper Company
$31.29
Distressed or Transitioning
75%
Current EPS × Depressed Multiple
Moderate
·
Conviction
Overvalued
Trading 15.6% above fair value
You pay
$31.29
Bear
$18.04
Fair
$27.06
Bull
$36.09
Bear
$18.04
-42.3%
EPS continues to decline, 5x multiple
Fair
$27.06
-13.5%
Current EPS stabilizes, 8x multiple
Bull
$36.09
+15.3%
Credible recovery, multiple re-rates to 10x
Key Value Driver
Whether the core business model is intact or structurally impaired
Implied Market Multiple
11.3x
Summary
Our base-case estimate uses Current EPS × Depressed Multiple. We then blend that result with the average analyst price target of $46.20 from 29 analysts, using a 25% weight on analyst consensus. That produces an estimated intrinsic value of $27.06 per share.
Warnings
Don't assume past cash flow levels will return — the company's troubles may have permanently reduced its ability to generate profits.
A stock can look cheap on paper and still lose half its value if the underlying business is permanently damaged.
The wide range between our best and worst cases is intentional — pretending to know a precise value for a troubled company would be misleading.
Debt per share ($18.24) is more than half the stock price. With this much debt on a struggling business, the paths to recovery for shareholders are narrow.
Wall Street's average price target is $46.20 (from 29 analysts). Our estimate is 55% below the consensus -- consider that gap carefully.
Key Risks
- Bullish DCF projections are fundamentally unknowable for distressed companies
- M&A speculation can floor the stock above intrinsic value temporarily
- Management credibility is a key input — new CEO expands the bull case