Paper and packaging company DS Smith (OTCPK:DITHF) has been making waves in the financial world lately. It has seen significant growth in recent years, with revenue up 33% from 2019 and net margin showing improvement. However, the recent surge in share price can be attributed to potential acquisitions rather than just business performance.
Performance Can Continue Strongly
Demand for paper and packaging has been on the rise, driven by increased consumer spend on online purchases. DS Smith is well-positioned to benefit from this trend, thanks to its strategic positioning in key markets.
DS Smith is a Takeover Target
Trade rival Mondi initially expressed interest in acquiring DS Smith, but the deal fell through. A new offer from International Paper is on the table, valuing DS Smith shares at 415p each. This represents a 20% discount to the current market price, presenting an arbitrage opportunity.
Will the Deal Proceed?
While the potential acquisition by International Paper seems promising, uncertainties remain. Another bidder, Suzano, is also in the picture. Nevertheless, the outlook for DS Smith remains positive, whether the deal goes through or not.
How to Value DS Smith Now
Even if the acquisition does not materialize, DS Smith presents an attractive investment opportunity. With a low P/E ratio and healthy dividend yield, the company is undervalued compared to its peers. The growth potential and solid financial performance make DS Smith a compelling buy, regardless of the deal outcome.
In conclusion, DS Smith offers significant upside potential for investors, backed by strong financials and a promising future outlook. Whether it's through an acquisition or organic growth, the company is primed for continued success. As such, I maintain a “buy” rating on DS Smith. Investors should keep an eye on developments in the acquisition saga, but the long-term prospects for the company look bright.