SLVM - Sylvamo: Growth Returns FCF Not Yet Priced In

2024-06-04 04:26:29 ET

Summary

• Sylvamo stock has increased by 45% and exceeded my previous valuation target of $55/share.
• The company's performance in Q1 FY 2024 showed strong net sales and a reduction in economic downtime, which could lead to future earnings growth.
• Management's capital allocation decisions, including stock repurchases, demonstrate good capital budgeting, resulting in excellent returns on capital deployed.

Investment Summary

Following my last publication on Sylvamo ( SLVM ), the stock has lifted 45% into the green and surpassed my previous valuation target of $55/share.

Winding back the clock, in Q3 FY 2023, we advocated for the materials (alongside the industrial sector) as the most attractive S&P 500 sector on a price/value basis. It had 10% projected earnings growth with just 2% of the Index's weighting, making it the most attractive under this composite (Figure 1)....

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