Large packaging corporation Smurfit WestRock has recently started to trade on the New York Stock Exchange (NYSE). This has left investors optimistic that the US listing could lead to a greater value assessment. A potential significant “re-rating” of the valuation is a reason why the Bank of America (BofA) has assigned a purchase recommendation to the stocks. As BofA indicates, traditionally, paper and packing firms listed in America have traded at a higher value than those listed in Europe.
BofA makes a note of Smurfit Westrock’s business value being 6.7 times its earnings prior to taking into account interest, taxes, depreciation and amortisation (Ebitda). This is in comparison to its American counterparts who average a long-term 7.5 multiple of these earnings.
America’s higher values are propelled by increased liquidity. Information from Boston’s Verdad Capital demonstrates that US stocks are nearly double as liquid as global stocks. While Verdad has a preference for stocks outside the US, they recognise that the US “is without doubt the monarch of equity marketplace liquidity”. Yet investors must recognise that this comes at a cost of considerable higher values.
As far as Smurfit is concerned, it is yet unclear if its value will eventually match that of its fellow US businesses. Nonetheless, it is understandable why the increased liquidity and greater values available have persuaded businesses like Smurfit, CRH and Flutter to switch from Irish markets to US listings.