• Investors may be wondering whether International Paper is now priced attractively after a rough patch, or if the stock price still does not reflect its underlying value.
• The share price closed at US$31.86 with returns of a 6.3% decline over 7 days, an 8.4% decline over 30 days, a 20.8% decline year to date and a 25.3% decline over the last year, compared with a 13.5% gain over 3 years and a 33.4% decline over 5 years.
• Recent headlines around International Paper have focused on broad sector sentiment and investor positioning in packaging and paper stocks. These factors can affect how quickly the share price reacts to changing expectations. Such shifts in attention often influence how investors weigh near term challenges against longer term cash flow potential.
• Against this backdrop, International Paper currently holds a valuation score of 6 out of 6. The next sections will explain what that means across different valuation methods and will also highlight one additional way to assess value at the end of the article.

Approach 1: International Paper Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model estimates what a stock could be worth by projecting its future cash flows and discounting them back to today’s value.

For International Paper, the model used is a 2 Stage Free Cash Flow to Equity approach. The latest twelve month free cash flow stands at about $1.01b. Analysts provide explicit forecasts for several years, and Simply Wall St then extends these to a full 10 year path, with projected free cash flow of $4.36b in 2035. Each of these future cash flows is discounted back to today using the model’s assumptions to reflect risk and the time value of money.

On this basis, the estimated intrinsic value for International Paper is US$136.75 per share. Compared with the recent share price of US$31.86, the model suggests the stock trades at a 76.7% discount.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests International Paper is undervalued by 76.7%. Track this in your watchlist or portfolio, or discover 51 more high quality undervalued stocks.

Approach 2: International Paper Price vs Sales

For companies like International Paper, where revenue is a key reference point, the P/S multiple is a useful way to look at value because it compares what you pay for each dollar of sales rather than focusing on earnings, which can be affected by accounting items.

In general, higher growth expectations and lower perceived risk can justify a higher “normal” P/S multiple, while slower expected growth or higher risk often line up with a lower multiple. Against that backdrop, International Paper currently trades on a P/S ratio of 0.69x. This is very close to the Packaging industry average P/S of 0.70x and below the peer group average of 1.27x.

Simply Wall St’s Fair Ratio is a proprietary estimate of what P/S might be appropriate for the stock once factors like earnings growth, profit margins, industry, market cap and company specific risks are taken into account. For International Paper, the Fair Ratio is 1.86x, which is higher than the current 0.69x P/S. On this comparison, the stock appears undervalued on a P/S basis.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your International Paper Narrative

Earlier the article mentioned that there is an even better way to understand valuation. Narratives step in as a simple framework where you set the story for International Paper, link that story to concrete forecasts for revenue, earnings and margins, and let the Simply Wall St Community page turn it into a Fair Value that you can compare with the current share price. Examples range from a more optimistic view that sees potential for US$48.00 per share based on higher growth and margin expectations, through to a more cautious view anchored around US$38.00. These Narratives update automatically as new news, earnings or pricing data arrives, so your decision to buy, sell or hold is always tied to a clear, transparent rationale.

Do you think there's more to the story for International Paper? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.