Should You Buy Amcor Limited at this Share Price?

By ,

What Happened to the AMC Share Price?

Amcor Limited [ASX:AMC] was down by 1.29% by 2:20pm today. The stock was trading at $14.49 a share. Bank shares weighed on the Aussie market in the morning, and the downward pressure continued in the afternoon after the release of China’s GDP figures.

China grew 7% year-on-year in the first quarter of 2015. This was lower than expectation. However, given the latest trade figures and other leading indicators, it is no surprise that the first quarter GDP figure was weak. The world’s second largest economy has not reached a bottom yet. The unstoppable rally on the Hong Kong stock exchange has been more tempered in the last two days.

Why Did This Happen to AMC Shares?

The global packaging giant Amcor has been a market darling for much of the last three years. The stock has so far returned over 120% in the last five years.

Why has the group done so well?

Amcor is a very competitive business at its core. It has completed 16 acquisitions in the last four years that have contributed to both organic and acquisitive growth for the company. At the same time, the company has been able to rein in its costs to fatten its margin. This was of course helped by lower packaging raw material costs in paper and aluminium.

The group is a big cash generator and that tends to boost valuation overtime. The company has benefited from a recovery in private consumption in North America, its principle market. It’s emerging market segment has also continued to grow. As of late, Amcor CEO Ken MacKenzie expressed that the company will focus on growing its presence in Latin America.

What Now for AMC?

Latin America is currently undergoing a tough economic phase. It is experiencing lower growth, high inflation and potential tightening from central banks. Overall structural reform is yet to be delivered in economies such as Brazil.

However, the long term prospect of Latin America is a compelling one. Its eventual recovery will see a meaningful pickup in activities, which would no doubt benefit Amcor. Right now, it is a great time for Amcor to establish its presence in Latin America, especially through local acquisitions, since assets are cheap.

There is no major huddle for Amcor in the immediate future. Its performance will be healthy.

Ken Wangdong
Emerging Market Analyst, New Frontier Investor

About Money Morning

At Money Morning our aim is simple: to give you intelligent and enjoyable commentary on the most important stock market news and financial information of the day - and tell you how to profit from it. We know the best investments are often the hardest to find. So that's why…

Weekly ASX Market Wrap — Newcrest and Ansell Top Movers Last Week

Last week saw a relatively steady week for the ASX All Ordinaries [XAO]. It opened at 5,488 points, trading up on the Monday only to fall back over the rest of the week with a minor recovery on Friday, closing out the week at 5,492…