Packaging giant Smurfit WestRock has begun trading on the New York Stock Exchange (NYSE), with investors hoping the US listing will drive a higher valuation.
Potential for a “meaningful” valuation re-rating is one reason Bank of America (BofA) has slapped a buy rating on the shares. “US-listed paper and packaging companies have historically traded at a premium to European-listed companies”, says BofA.
It notes Smurfit Westrock’s enterprise value is 6.7 times earnings before interest, tax, depreciation and amortisation (Ebitda), compared with a long-term average of 7.5 for its US peers.
Greater liquidity partly drives America’s higher valuations. Data from Boston-based Verdad Capital indicates US stocks are roughly twice as liquid as their international counterparts. Verdad prefers non-US stocks, saying the US is the “unquestionable king of equity market liquidity”, but investors “pay a price for this” in the form of “dramatically” higher valuations.
Returning to Smurfit, it remains to be seen whether its valuation will eventually approach its US peer group. Still, one can see why the greater liquidity and higher valuations on offer have tempted companies like Smurfit, CRH, and Flutter to depart the Irish market for US listings.
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