ABP 1

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University Of Arizona *

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111

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Finance

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Jan 9, 2024

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You MUST add your answers to the template file Word document posted on D2L when preparing your report You must download the Word original ABP-1 template file posted on D2L and add your answers to the provided template file. If you do not use the required template file (e.g., re- creating the items in your own report document), there will be a 5-point deduction! You MUST Submit your ABP-1 report as a PDF-formatted file If you do not submit your report as a PDF document, there will be a 10-point deduction! Name: Vineyard, Caytlen (caytievineyard@arizona.edu) Project: ABP-1 – Financial Analysis Task 1: Company Profile 1.1. Company Governance

Task 1.1 Company Governance Company’s legal company name International Paper Company Company’s trading exchange and ticker symbol IP Company’s primary website URL https://www.internationalpaper.com/ Corporate Headquarters Location Memphis, TN 38197 Most key executive and title Mr. Mark Stephan Sutton Chairman and CEO Company fiscal year end December 31 st ,2022 Company’s full-time employees 39,000 Industry sector Consumer Cyclical Industry classification Packaging and Containers Company’s Corporate Governance Institutional Shareholder Services 5 Company’s Environment, Social and Governance Total Risk Score 1 Table 1- International Paper Company Corporate governances (Sources: https://finance.yahoo.com/quote/IP/profile?p=IP https://www.internationalpaper.com/ Referenced 9/12/2023) 1.2. Financial profile Task 1.2 Financial Profile The date of Financial Profile 9/12/2023 Previous Close 34.60 Volume 2,116,997 Average volume 3,023,448 52-week range (high and low) 29.01-41.89 One Year Target Estimate 32.62 Company PE Ratio 8.54 Company Earnings per Share (EPS) 4.04 Profitability / Operating Margin (TTM) 7.77% Shares available for trading by the public 344.28M Market Cap 11.937B Top institutional holder and percentage held Vanguard Group Inc 12.01% Analyst Fair Value Recommendation Undervalued Recommendation rating Hold Table 2- International Paper Company Financial Profile (Source: https://finance.yahoo.com/quote/IP/profile?p=IP Referenced 9/12/2023) 1.3. Investment Assessment (150 word original analysis) According to Yahoo Finance the stock “IP” is undervalued, and its current recommendation rating is to hold. Looking at the recent product sales trend for this stock, it

is obvious that it plateaus quite frequently. On May 4 th , 2023, the International Paper Company hit $31.79 per share, on July 21 st , 2023, the stock was still around the same price, at $31.85 per share. Within these two dates IP did fluctuate, it’s high was $32.13 per share while its low was $29.17 per share. July 21 st was when the stock finally broke out of this pattern and went up. This is not the only example that shows that IP has a history of being recommended to hold, it did the same thing between October and November of 2022, as well as in between November of 2022 and January of 2023. Currently IP is re-creating this trend. It hit $36.59 per share on August 2 nd , 2023, and as of September 12 th , 2023, it is sitting at $34.50 per share. Overall, this stock has lingered around the same price for quite some time, and it is recommended to be held because it is unknown weather IP is more likely to go up or down. International Paper Company Investment Assessment (Source: https://finance.yahoo.com/quote/IP/chart?p=IP Referenced 9/13/2023) Task 2: Fundamental Analysis 2.1. Financial Metrics Task 2.1 Historical Stock Analysis and Fundamentals (in millions except per share) Closing Date 12/31/2022 12/31/2021 12/31/2020 Balance Sheet Fundamentals Total Assets 23,940,000 25,243,000 31,718,000 Current Assets 6,770,000 7,096,000 11,236,000 Inventory 1,942,000 1,814,000 2,50,000 Total Liabilities 15,443,000 16,161,000 23,850,000 Current Liabilities 5,000,000 4,144,000 8,284,000 Long Term Debt 4,816,000 5,383,000 10,156,000 Stockholders Equity 8,497,000 9,082,000 7,854,000 Income Statement Fundamentals Total Revenue 21,161,000 19,363,000 20,580,000 Cost of Revenue 15,143,000 13,832,000 14,373,000 Gross Profit 6,018,000 5,531,000 6,207,000 Operating Income 1,754,000 1,466,000 1,678,000 EBIT 1,836,000 1,336,000 1,094,000 Cash Flow Statement Fundamentals Operating Cash Flow 2,174,000 2,030,000 3,063,000 Investing Cash Flow -608,000 6,054,000 -269,000 Financing Cash Flow -2,054,000 -7,375,000 -2,700,000

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End Cash Position 804,000 1,295,000 595,000 Changes in Cash -488,000 709,000 92,000 Historical Data Adj. Closing price on Closing Date 33.28 42.97 41.72 Volume on Closing Date 2,016,800 1,669,900 1,523,789 Table 3- International Paper Company Financial Metrics (Source: https://finance.yahoo.com/quote/IP/financials?p=IP Referenced 9/13/2023) 2.2. Media Perspectives (150 word original analysis) On September 6 th , 2023, International Paper announced that CEO and Chairman, Mark Sutton has asked for the board of directors to go into the next phase of the company’s CEO succession plan. This is the phase where the board begins an evaluation of internal, as well as external, candidates to find Sutton’s successor. This is very valuable information for investors within IP. Mark Sutton has been the CEO and chairman for the past ten years, so he has been the person of authority and overseen everything within the last decade. When International Paper finds Sutton’s successor, a lot could change within the company’s financials. Within 2020, 2021, and 2022 the company has had a gross profit between 5,531,00 and 6,207,000, the high being in 2020 and the low in 2021. Within these three years the company’s end cash position has been between 595,000 and 1,295,000, 2020 ended the lowest and 2021 ended the highest. These are a few of the International Paper company’s financial metrics, that show where Mark Sutton has been keeping the company. Investors need to know about Sutton’s successor, as well as who he will be, so they are able to make the decision to buy, sell, or hold their stocks. A new CEO can easily result in several financial changes. International Paper Company Media Perspectives (Source: https://finance.yahoo.com/news/international-paper-announces-ceo-succession- 213000946.html Referenced 9/13/2023 ) Task 3: Quantitative Analysis Analysis 3.1. Stock Price Analysis Table Task 3.1 Historical Stock Price Analysis Table (Reports adjusted closing price) Closing Date IP WRK NASDAQ Dec. 31, 2021 43.24 42.18 15,644.97 Jan. 31, 2022 44.1 43.9 14,239.88

Feb. 28, 2022 40.47 42.28 13,751.40 Mar. 31, 2022 42.91 44.96 14,220.52 Apr. 29, 2022 43.03 47.35 12,334.64 May. 31, 2022 45.48 46.58 12,081.39 Jun. 30, 2022 39.27 38.27 11,028.74 Jul. 29th, 2022 40.15 40.69 12,390.69 Aug. 31, 2022 39.49 39.23 11,816.20 Sep. 30, 2022 30.08 29.85 10,575.62 Oct. 31, 2022 31.89 32.92 10,988.15 Nov. 30, 2022 35.67 36.94 11,468.00 Dec. 30, 2022 33.28 34.25 10,466.48 Table 4- Historical Stock Price Analysis Table (Source: https: https://finance.yahoo.com/quote/IP?p=IP&.tsrc=fin-srch Referenced 9/13/2023) 3.2. Industry Stock Price Graph Dec. 31, 2021 Jan. 31 , 2022 Feb. 28, 2022 Mar. 31, 2 022 Apr. 29 , 2022 May . 3 1, 2022 Jun. 30 , 2022 Jul . 29th, 2022 Aug. 31, 2 022 Sep. 30, 2022 Oct. 31, 2022 Nov. 30, 2022 Dec. 30, 2022 0 5 10 15 20 25 30 35 40 45 50 0.00 2,000.00 4,000.00 6,000.00 8,000.00 10,000.00 12,000.00 14,000.00 16,000.00 18,000.00 Industry Stock Price Graph IP WRK NASDAQ Last Trading Day of the Month Adj. Closing Price ($) NASDAQ Closing Price Figure 1- Industry Stock Price Analysis Chart (Source: https://finance.yahoo.com/quote/IP/history?p=IP Referenced 9/13/2023) Task 4: Technical Analysis 4.1. Fundamental numbers needed for Financial Ratios

Task 4.1 Financial Metrics Needed to Calculate Financial Ratios Market Capitalization 11,937,000,000 Accounts Receivable 3,284,000 Cash and Cash Equivalents 804,000 Short-term Investments 0 Current Assets 6,770,000 Current Liabilities 5,000,000 Total Equity 8,497,000 Table 5- Financial numbers needed for Financial Ratios (Source: https://finance.yahoo.com/quote/IP/balance-sheet?p=IP Referenced 9/13/2023) 4.2. Acid Test (150 word original analysis) Acid Test = Cash + Accounts Receivable / Current Liabilities 0.8176 = 804,000 + 3,284,000 / 5,000,000 At the end of International Paper company’s 2022 fiscal period, it had an Acid-Test Ratio of 0.8176. This ratio is used to see if a business can sell assets in ninety days to pay immediate expenses. According to this Investopedia article, a ratio of 1.0 or higher means that a company will be able to pay off short-term obligations, while a ratio below 1.0 means the company is more likely to struggle paying these obligations. IP has a below zero Acid Ratio. It is likely that the company assets are dependent on the company’s inventory. Many retail companies are inventory dependent, so this indicates that IP may not be in as bad of a position as it appears to be. With that being stated, it is foreseeable that IP may or may not have changes within the company’s liquidity. If an investor chooses to be cautious around IP that is understandable because its low acid test may indicate a loss in liquidity, but on the other hand many retail companies have a low acid rates due to money made in such a short time period. Meeting immediate expenses is very viable for a company, and if they aren’t meeting those expenses within ninety days it is a very good indicator the company will fall. Just keep in mind retail business make quick, in-and-out money. International Paper Company Acid-Test Analysis (Source: https://www.investopedia.com/terms/a/acidtest.asp Referenced on 9/13/2023) 4.3. Working Capital Ratio (150 word original analysis) Working Capital Ratio = Current Assets / Current Liabilities 13.54= 6,770,000 / 5,000,000

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Working capital measures a company’s liquidity and short-term financial health. A negative working capital means a company has more liabilities than assets, indicating it to be more difficult for the company to fund its operations and growth. When a company has a positive working capital, it strongly indicated that the company can fund themselves and continue to grow. International Paper company having a positive capital measure indicates the potential to invest in expanding and growing the company. IP is unlikely to go bankrupt because their current assets are much higher than their current liabilities. Retail companies, such as IP, can have a lower numbered working capital because it is much easier for them to raise short term funds. Overall, International Paper is in good short-term health, and is very unlikely to reach bankruptcy. It is easy to tell the state of IP just by looking at the current assets to current liabilities ratio. International Paper company Working Capital Ratio Analysis (Source: https://www.investopedia.com/terms/w/workingcapital.asp Referenced on 9/13/2023) 4.4. Price-to-Book Ratio (150 word original analysis) Price-to-Book Ratio = Market Capitalization / Total Stockholder’s Equity 1,404.85 = 11,937,000,000 / 8,497,000 Price-to-Book Ratio = Market Price per Share / Book Value per Share Market Price per Share = Current market price per share Book Value per Share = (Total assets – intangible assets – total liabilities) / number of outstanding shares 18.434 = (23,940,000 – 222,000 – 15,443,000) / 449,000 1.87 = 34.50 / 18.43 According to the Investopedia equation, the Price-to-Book ratio for International Paper was 1.87 on Sept. 12 th , 2023. According to “value investors” and stock below 3 is considered undervalued and favorable. Undervalued stocks are very important to investors because they are a good investment for when they get noticed and skyrocket. With that being said, it is only smart to consider IP undervalued and a good investment once it has been compared to its competing stocks. International Paper may have a P/B ratio pointing at undervalued, but it may be more valued than similar companies. Looking further into the Price-to-Book ratio is also compares high-growth companies to companies who may be facing a financial problem.

Companies with a P/B ratio above 1.0 are typically growing, whereas a P/B ratio below 1.0 can indicate financial distress. The Price-to-Book ratio of IP indicates the company to be in an ideal spot. Looking at the intangible assets and goodwill of IP also justify the P/B ratio. International paper has a healthy amount of both. Overall, the Price-to-Book ratio defined IP very well. International Paper company Price-to-Book ratio analysis (Sources: https://www.investopedia.com/terms/p/price-to-bookratio.asp https://www.investopedia.com/articles/investing/100614/goodwill-vs-other-intangible-assets- whats-difference.asp#:~:text=Key%20Takeaways,agreements%2C%20and%20website %20domain%20names Referenced on 9/13/2023)