3 Reasons to Sell SEE and 1 Stock to Buy Instead

Sealed Air Corporation (NYSE: SEE) has been in a holding pattern since August 2024, floating around $34.72 while the S&P 500 gained 16% during the same period. Our analysts are cautious about Sealed Air, and here are three reasons why SEE doesn't excite us, along with a stock we'd rather own.

1. Demand Slipping as Sales Volumes Decline

Revenue growth can be broken down into changes in price and volume. 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-over-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. However, the slow EPS growth indicates that Sealed Air has not been able to generate significant earnings growth, which could impact its long-term investment potential.

3. New Investments Fail to Bear Fruit as ROIC Declines

A company’s return on invested capital (ROIC) 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 our favorite semiconductor picks and shovels play.

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In conclusion, Sealed Air's declining sales volumes, stagnant EPS growth, and decreasing ROIC have raised concerns about its long-term investment potential. While its current valuation may seem reasonable, the company's struggles with demand, earnings growth, and profitability suggest that there may be better investment opportunities elsewhere. Semiconductor stocks, such as Nvidia and Sterling Infrastructure, offer higher growth potential and better fundamentals than Sealed Air, making them more attractive alternatives for investors.