Schweitzer-Mauduit International, Inc. (SWM) is expected to grow earnings per share by 20% in 2011 and 25% in 2012. Despite this, shares trade at just 10.1x the 2011 consensus estimate.
The company also pays a dividend that yields 1.1%. It is a Zacks #2 Rank (Buy) stock.
Company Description
SWM produces premium specialty papers for the tobacco industry, as well as specialty papers for other applications. Tobacco industry products account for approximately 93% of total sales.
It is headquartered in Alpharetta, Georgia and has a market cap of $928 million.
Fourth Quarter Results
Fourth quarter earnings per share came in at $1.07, beating the Zacks Consensus Estimate by 7 cents. It was up 2.9% from the same quarter in 2009.
Net sales were $182.8 million, which was down 2.7% year-over-year due in large part to unfavorable foreign currency effects. More importantly, average selling prices and sales volumes were up year-over-year.
Meanwhile, operating profit surged 23.8% due to cost improvements, higher sales volumes and higher average selling prices. These factors more than offset the effects of higher wood pulp costs.
Outlook
Although it did not provide precise guidance, management stated that it expects 2011 EPS to “exceed $5.00”. The Zacks Consensus Estimate is $5.23, representing 20% growth over 2010 EPS.
The Zacks Consensus Estimate for 2012 is currently 25% higher at $6.52. It is a Zacks #2 Rank (Buy) stock.
Dividend
SWM pays a dividend that yields 1.1%. It has paid a consistent 15 cent quarterly dividend since 1996.
Its payout ratio is relatively low at just 14%, so if the company continues to grow EPS over the next couple years, I’d expect the company to finally raise its dividend soon.
Although SWM faces serious regulatory risks, it appears that much of this has been priced into the stock. Shares trade at just 10.1x forward earnings, a discount to the industry average of 13.2x.
It sports an attractive PEG ratio of 0.58 based on a 5-year EPS growth rate of 17.5%.
Its price to book ratio of 1.8 is also a discount to the industry average of 2.6.
Todd Bunton is the Growth & Income Stock Strategist for Zacks.com.
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