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Envases del Pacifico (EDELPA) Stock – Investment Analysis

Common Stock: Envases del Pacifico (EDELPA)

Current Market Price: $104.41 CLP

Market Capitalization: $11.9 Billion CLP

*All values in this article are expressed in Chilean Pesos (CLP) unless otherwise noted.

**The bulk of this analysis is based on the company’s most recent audited financial report, which can be found by following this link.

Envases del Pacifico (EDELPA) - Stock Chart
Envases del Pacifico (EDELPA) – Stock Chart

Envases del Pacifico Stock – Summary of the Company

Envases del Pacifico is a Chilean packaging company. They manufacturer and sell flexible packaging products, mainly for the food industry. Their production facility is 39,000 square meters, giving them an annual production capacity of 18,000 tons. The company has around a 30% market share in Chile, and also exports regionally.  Envases del Pacifico was founded in 1967 and is headquartered in Santiago, Chile. They employ around 500 people.

Envases del Pacifico - Products
Envases del Pacifico – Products

Revenue and Cost Analysis

EDELPA had total revenue of $42 billion in 2019, a significant decrease compared to $50.6 billion in 2018. Their COGS in 2019 was $42.3 billion, meaning the company had a gross loss in 2019, also a significant decrease compared to a gross margin of 10% in 2018.

Due to the deterioration in their top line results, EDELPA had a net loss of $3.4 billion in 2019, a significant deterioration compared to a profit of $1.8 billion in 2018.

Envases del Pacifico - Clients
Envases del Pacifico – Clients

Balance Sheet Analysis

EDELPA has a decent balance sheet. They have sufficient liquidity in the near term and a base of long term assets. The company is not over leveraged, but liability levels, including debt, are relevant.

Envases del Pacifico – Debt Analysis

As of year-end 2019 the company has $10.9 billion in total debt outstanding, $4.9 billion of which is classified as current.

Envases del Pacifico Stock – Share Dynamics and Capital Structure

As of year-end 2019 the company has 113.6 million common shares outstanding. Their 12 largest shareholders own a combined 96% of the company.

Envases del Pacifico Stock - Ownership Structure
Envases del Pacifico Stock – Ownership Structure

Envases del Pacifico Stock – Dividends

The company paid total dividends of $5.0 per share in 2019. At the current market price this implies a dividend yield of 4.8%.

Envases del Pacifico Stock – 3 Metrics to Consider

Debt to Equity Ratio

Total Liabilities/Total Share Holder Equity

$25.5 billion / $32.7 billion = .78

A debt to equity ratio of .78 indicates that EDELPA uses a mix of debt and equity in its capital structure, but is not leveraged, and relies more heavily on equity financing.

Working Capital Ratio

Current Assets/Current Liabilities

$21.9 billion / $17.5 billion = 1.2

A working capital ratio of 1.2 indicates a sufficient, but not strong liquidity position. EDELPA should not have problems meeting its near term obligations.

Price to Book Ratio

Current Share Price/Book Value per Share.

$104.41 / $288.27 = .36

EDELPA has a book value per share of $288.27. At the current market price this implies a price to book ratio of .36, meaning the company’s stock currently trades at a significant discount to the book value of the company.

Envases del Pacifico Stock – Summary and Conclusions

EDELPA is a decent company. They have been operating for over 50 years and have around 30% of the Chilean packaging market. They have a good client book and relevant exports.

However the company’s operating results deteriorated significantly in 2019, and the company is in poor financial health. Due to their weak financial position, and no obvious reason to expect a turnaround, I do not view EDELPA stock as investable.

Investors can compare EDELPA stock to Brazilian packaging company Klabin.

Disclaimer

This is not investment advice. Nothing in this analysis should be construed as a recommendation to buy, sell, or otherwise take action related to the security discussed. If I own a position in the security discussed, I will clearly state it.

This is not intended to be a comprehensive analysis and you should not make an investment decision based solely on the information in this analysis. I hope this serves as a useful starting point for a more comprehensive analysis, and hopefully draws attention to aspects of the company that were overlooked or merit further investigation. This is by no means intended to be a complete analysis. Again, this is not investment advice, do your own research.

Patrick Flood, CFA

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