Is the DS Smith share price too cheap to ignore?

first_img I’m sure you’ll agree that’s quite the statement from Motley Fool Co-Founder Tom Gardner.But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.What’s more, we firmly believe there’s still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.And right now, we’re giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool. Is the DS Smith share price too cheap to ignore? Image source: Getty Images I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement. David Barnes owns shares in DS Smith. The Motley Fool UK has recommended DS Smith. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors. Simply click below to discover how you can take advantage of this. Enter Your Email Address Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we’re offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our ‘no quibbles’ 30-day subscription fee refund guarantee.center_img David Barnes | Monday, 27th July, 2020 | More on: SMDS “This Stock Could Be Like Buying Amazon in 1997” Our 6 ‘Best Buys Now’ Shares Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge! FTSE 100 constituent DS Smith (LSE: SMDS) is a specialist packaging company. The firm produces paper and corrugated cardboard boxes that have been in high demand for deliveries over the past few months.But the DS Smith share price has struggled. It has fallen 30% from its year high and the company now trades on a trailing price-to-earnings ratio of just over 8. Why is a company, seemingly in demand, struggling, and does this lower share price offer a good entry point for an investment?5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…And if you click here we’ll show you something that could be key to unlocking 5G’s full potential…The DS Smith share price is inherently cyclicalThere is a correlation between the DS Smith share price and the state of the global economy.The coronavirus has resulted in far less demand from industrial customers, and this translates to fewer packaging products and ultimately lower prices.DS Smith’s fortunes are also tied to the price of the raw materials it uses. The low price of paper has also hit the group’s North American paper manufacturing and export businesses. In an effort to make itself a less cyclical company, the firm is aiming to produce less of its own paper. It currently manufactures about 80% of the paper it needs but is targeting to reduce this to 60%.You might think this outsourcing would increase costs. But it means that when the economy is struggling it gets the raw materials cheaper. When times are good, it makes less profit. The aim is to even out earnings.DS Smith has been resilient through the pandemic. In July financials, revenue fell just 2% and basic earnings per share actually increased 7%. But the firm is clearly looking to the future and foresees a difficult time ahead for the economy.The company announced it was cancelling the interim dividend and wouldn’t be paying a final dividend to preserve cash. While probably prudent, the DS Smith share price dropped 7% on the day.I think the future is brightAs you might imagine, corrugated box volumes have been strong particularly in Europe through the pandemic. E-commerce sales are exploding and that is only good news for this packaging specialist. In addition, 70% of business volume for DS Smith is through consumer goods and groceries and these sectors typically weather an economic storm well.  The firm is also on trend in terms of reducing its environmental impact. It is increasing its use of recycled materials and disposing of its plastic packaging business. This sale helped to reduce debt, which had risen slightly higher than my liking following the acquisition of Europac last year (a French, Spanish, and Portuguese packing company).Historically we are looking at a company that has steadily grown operating profit for a number of years. And I see several long-term trends that will benefit the firm once the economy gets going again.In my view the DS Smith share price already factors in a very bumpy next 12 months. But after that, I foresee the dividend being reinstated. I think we will then once again be looking at a fantastic income and growth company. I’d buy now while the share price is low. See all posts by David Barneslast_img read more