Since August 2024, Sealed Air has been in a holding pattern, floating around $34.72. The stock also fell short of the S&P 500’s 16% gain during that period.

Is now the time to buy Sealed Air, or should you be careful about including it in your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.

We're cautious about Sealed Air. Here are three reasons why SEE doesn't excite us and a stock we'd rather own.

Why Do We Think Sealed Air Will Underperform?

Founded in 1960, Sealed Air Corporation (NYSE: SEE) specializes in the development and production of protective and food packaging solutions, serving a variety of industries.

1. Demand Slipping as Sales Volumes Decline

Revenue growth can be broken down into changes in price and volume (the number of units sold). While both are important, volume is the lifeblood of a successful Industrial Packaging company because there’s a ceiling to what customers will pay.

Over the last two years, Sealed Air’s units sold averaged 4.5% year-on-year declines. This performance was underwhelming and implies there may be increasing competition or market saturation. It also suggests Sealed Air might have to lower prices or invest in product improvements to grow, factors that can hinder near-term profitability.

2. EPS Barely Growing

We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.

Sealed Air’s weak 3.3% annual EPS growth over the last five years aligns with its revenue performance. This tells us it maintained its per-share profitability as it expanded.

3. New Investments Fail to Bear Fruit as ROIC Declines

A company’s ROIC, or return on invested capital, shows how much operating profit it makes compared to the money it has raised (debt and equity).

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Sealed Air’s ROIC has unfortunately decreased. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.

Final Judgment

Sealed Air falls short of our quality standards. With its shares underperforming the market lately, the stock trades at 11.5× forward price-to-earnings (or $34.72 per share). While this valuation is reasonable, we don’t see a big opportunity at the moment. There are better investments elsewhere. We’d suggest looking at a top digital advertising platform riding the creator economy.

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