Tales of the Ticker
One of the most useful research tools we have at New Direction Partners is our printing and packaging stock index. With it, we track the stock price performance of nine printing companies and the seven top packaging companies—all 16 of them publicly traded—from 2006 to the current date. We then can compare trends in the two segments with what has been happening on a more macroeconomic level by looking at them next to the Dow Jones Industrial Average (DJIA) and the S&P 500 Index.
From 2006 through the end of 2008, all four indexes performed almost identically. They all followed the same trends so that when one went up, the other three went up. Conversely, when one went down, the others also moved in that direction.
But the packaging industry took off in 2009, and all of a sudden, packaging started outperforming all of the other industries by a big margin. Printing stocks, on the other hand, continued to track the same as the two general indexes.
Since 2010, the packaging industry has followed the same pattern as the other industries, but its stock prices have grown at faster rates. This tells us that packaging stocks are still viewed very positively on Wall Street by investors. It also helps to explain why those businesses are selling at higher multiples than companies in other industries.
The stocks of the printing companies have generally followed patterns similar to those of the S&P 500 and the DJIA, but at much lower rates of growth. This means that their stocks, unfortunately, have not been as attractive to investors. We’re also seeing that these companies are trading at lower multiples and, until recently, have not been nearly as desirable to buyers as firms in the packaging segment.
Peter Schaefer, partner at New Direction Partners, is an experienced dealmaker with more than 25 years of investment banking and valuation experience, 20 of which has been focused exclusively on the printing and packaging industries. He has closed more than one hundred transactions in virtually every segment of the printing and packaging industries. In addition, he has performed hundreds of valuations for ESOPs, estate and gift tax planning and strategic planning purposes. Contact him at (610) 230-0635, ext. 701.