Seeking Alpha Touts Amcor as Undervalued Income Play, but DeepValue Report Flags High Leverage and Overvaluation

What happened

A Seeking Alpha article published on February 18, 2026, recommends buying Amcor shares as an undervalued income stock, citing a forward P/E of 12.6x, 68% YoY sales growth from the Berry acquisition, and a 5.2% dividend yield with a 69% payout ratio. However, the latest DeepValue master report, based on SEC filings including the 2025 10-K and 10-Q, assigns a 'POTENTIAL SELL' rating due to elevated leverage with net debt/EBITDA at 8.02x, compressed GAAP margins from ~10% in 2023 to ~6.7% in 2025, and weak interest coverage of 2.5x. The article highlights EBITDA margin expansion and deleveraging plans, but the report notes that operating cash flow was negative in Q1 FY26, synergy targets are ambitious, and regulatory risks on plastics and PFAS loom large. Despite the stock's 18% decline over 12 months, it trades at $8.35, approximately 58% above a conservative DCF intrinsic value estimate of $5.28, suggesting the market already prices in substantial synergy success. This clash underscores that while income-focused investors may be attracted to the dividend, fundamental analysis reveals significant financial strain and execution hurdles that the bullish narrative glosses over.

Implication

The Seeking Alpha article's optimistic stance on growth and income overlooks severe balance sheet concerns, including net debt/EBITDA of 8x and interest coverage of 2.5x, which could strain dividend sustainability if cash flows weaken. Amcor's ability to achieve its $650 million synergy target by FY28 is crucial but uncertain given current integration costs and regulatory headwinds on plastics packaging. Income seekers might find the 5.2% yield tempting, but the high payout ratio amid elevated leverage raises red flags about long-term financial flexibility. For value-oriented investors, the stock's premium to intrinsic value offers limited margin of safety, necessitating caution until visible progress on deleveraging and margin repair emerges. Monitoring quarterly updates on synergy realization, net debt trends, and regulatory adaptations will be key to validating any investment thesis.

Thesis delta

The Seeking Alpha article does not alter the bearish thesis from the DeepValue report, as it relies on forward-looking projections that conflict with current financial realities of high leverage and margin erosion. Instead, it reinforces the need for skepticism, emphasizing that investors should wait for concrete evidence of synergy delivery and balance sheet improvement before considering a position shift. No fundamental shift is warranted until Amcor demonstrates sustained operational recovery and debt reduction.