GPK

We rate GRAPHIC PACKAGING HOLDING CO (GPK) as a Reduce with a composite score of 41.1/100 at a current price of $12.15. The quantitative profile shows weakness across multiple dimensions, suggesting limited upside potential and elevated risk of underperformance relative to peers over the next 12 months.

The rating is primarily driven by strength in value (70th percentile) and stability (66th percentile), which together account for the majority of the composite score. Offsetting weakness in momentum (16th percentile) and investment (36th percentile) tempers our overall conviction. We assign a No Moat rating (37/100), Medium uncertainty, and Standard capital allocation.

Key items to watch: momentum to confirm whether the current price trend has legs; balance sheet deleveraging progress. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

GRAPHIC PACKAGING HOLDING CO holds a top-quartile position (#0 of 50) within the Manufacturing sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 41.1/100 places it at rank #3405 in our full 7,333-stock universe. At $5.8B in market capitalization, GRAPHIC PACKAGING HOLDING CO is a mid-cap player in the Manufacturing space, which limits certain scale advantages but may allow for more agile strategic execution.

Revenue contraction of -2% combined with momentum at the 16th percentile paints a cautious picture of the near-term business outlook. The market appears to be pricing in continued challenges, and a catalyst for reversal is not clearly visible from current data.

The margin cascade tells an important story: gross margins of 21% (-21.9pp vs sector) narrow to operating margins of 11% (+9.3pp vs sector) and net margins of 6.2%, yielding a gross-to-net conversion rate of 30%. This conversion rate is typical for the sector, suggesting a standard cost structure without notable efficiency advantages or disadvantages.

At a current price of $12.15, GRAPHIC PACKAGING HOLDING CO appears undervalued relative to its fundamentals. Our value factor score of 70/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. The stock screens as attractively priced on a majority of these measures, suggesting the market may be underappreciating the underlying fundamentals.

The stock currently trades at a P/E of 6.9x (a 69% discount to the sector median of 22.3x), EV/EBITDA of 10.2x (near the sector median), P/B of 1.1x, P/S of 0.4x. The below-sector P/E suggests possible undervaluation or the market pricing in near-term headwinds.

We assign a Medium uncertainty rating to GRAPHIC PACKAGING HOLDING CO. The stock presents a balanced risk profile: significant leverage (176% debt-to-equity) and low beta of 0.53 — while defensive, this may indicate limited upside participation in bull markets. While not risk-free, the core business fundamentals are adequate to withstand moderate economic stress, and the range of potential outcomes around our fair value estimate is manageable.

Specific risk factors that inform our assessment include: significant leverage (176% debt-to-equity); low beta of 0.53 — while defensive, this may indicate limited upside participation in bull markets. Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 66th percentile and quality factor at the 51th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: above-average stability (66th percentile) suggests predictable business dynamics; a 2.20% dividend yield anchors total return. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile is favorable for long-term investors.

We rate GRAPHIC PACKAGING HOLDING CO's capital allocation as Standard. Management has shown adequate — though not exceptional — stewardship of shareholder capital. Returns on equity stand at 16.4%, and the balance sheet is managed within acceptable parameters (D/E: 176%). Exemplary allocators typically sustain ROE above 20% and D/E below 50%; GRAPHIC PACKAGING HOLDING CO falls short on at least one dimension.

There is room for improvement in optimizing the capital structure or enhancing shareholder returns. The 2.20% dividend yield provides some income return, but the overall capital allocation framework would benefit from either higher reinvestment returns, improved balance sheet efficiency, or increased shareholder distributions. We will monitor for signs of strategic improvement that could warrant an upgrade.

In summary, GRAPHIC PACKAGING HOLDING CO receives a Reduce rating with a composite score of 41.1/100 (rank #3405 of 7,333). Our quantitative framework assigns a No Moat (37/100, trend: stable), Medium uncertainty, and Standard capital allocation. The average factor score across quality, value, momentum, stability, and investment is 48/100.

Our analysis does not support a constructive view on GRAPHIC PACKAGING HOLDING CO at this time. The combination of limited competitive advantages, medium uncertainty, and standard capital allocation suggests unfavorable risk-reward at current levels. We recommend investors avoid new positions and existing holders consider reducing exposure.