$100.14
$189.97
bear $100.14
base $149.75
bull $189.97
margin of safety $95.00
market price* $236.00
What the business is. Packaging Corporation of America (PCA) is the third-largest producer of containerboard (the linerboard and corrugating medium that boxes are made from) in North America and a leading producer of uncoated freesheet office and printing paper. It runs ten mills and 91 corrugated products plants in the United States. Most of the mills' output goes into PCA's own box plants, which sell corrugated boxes to local and regional customers, usually within about 150 miles of each plant. Packaging is the business that matters: in 2025 the Packaging segment earned $1,125 million of operating income and the Paper segment, a single mill at International Falls, Minnesota, earned $130 million. Profits move with containerboard prices, fiber, energy and freight costs, so results are cyclical. Even so, cash dividends paid rose every year, from $223 million in 2016 to $452 million in 2025. Recent changes. On September 2, 2025 PCA bought Greif's containerboard business for $1.8 billion in cash: mills at Massillon, Ohio and Riverville, Virginia with about 800,000 tons of capacity, plus eight sheet-feeder and corrugated plants. The purchase was paid for with a $500 million three-year term loan due September 2028, a $500 million seven-year Farm Credit term loan due September 2032, $500 million of 5.20% notes due 2035, and cash on hand. In December 2025 PCA said it would permanently close the No. 2 paper machine and kraft pulping at its Wallula, Washington mill. That closure was finished in the first quarter of 2026, and PCA recorded $128 million of charges for it in 2025. The industry backdrop in 2025 was soft. North American corrugated shipments fell 1.8% and containerboard production fell 4.5%, but PCA's containerboard prices still rose about 5%. The 2024 litigation accruals and insurance receivables for the DeRidder mill were settled in 2025. They show up as large offsetting swings in working capital and do not change the earning power. How we measured earnings. We start from operating cash flow and take out working-capital swings, stock compensation (a real cost) and the capital spending needed to maintain the plants. Only the part of capex that went with revenue growth is treated as optional. Non-cash charges are added back, including amortization of acquired customer relationships, the 2020 goodwill impairment and accelerated depreciation at closed machines. On that basis, owner earnings per share were $5.45 (2016), $7.32, $7.44, $8.16, $5.34 (2020), $8.64, $8.34, $9.07, $8.09 and $8.72 (2025). Each year was checked against net income plus depreciation and other non-cash items. The only gaps came from pension contributions above expense (for example $47 million in 2022) and a $56 million non-cash debt-redemption loss in 2021. To value the business before its lenders, we add back cash interest paid. That gives business cash flow per share of $8.47 (2018), $9.38, $6.36, $10.23, $9.26, $10.02, $9.30 and $9.84 (2025). The starting level. Containerboard is cyclical, so we use the median of 2018-2025. That period includes the 2019 peak, the 2020 trough, the 2021-22 boom, the 2023 revenue decline and the 2024-25 recovery. The median is $9.34 per share. We put about 10% of it on the paper mill, in line with Paper's share of segment profit. The Greif mills were owned for only four months of that window, so we add them separately. In 2025 they contributed only $8 million of operating income. In the first half of 2026, revenue rose $545 million (12.6%) from a year earlier, but operating income fell from $614 million to $543 million, while depreciation rose by $123 million. On that evidence we credit Greif with about $0.90 per share a year (around $80 million) in the base case, $0.40 in the bear case and $1.45 in the bull case. In 2025, owner earnings per share grew 7.8% and business cash flow per share grew 5.8%. The base case assumes only 2% for year one. Growth credited. From 2018 to 2025, PCA's business cash flow per share grew about 2% a year. Since 2016 it has bought box plants from its own cash (for example $274 million in 2017, $56 million in 2018 and $195 million in 2021) and cut its diluted share count from 94.5 million in 2021 to 89.6 million in 2025. That is the only growth we credit: 2% a year for ten years in the base case, 3% in the bull case and none in the bear case. We give no credit for the containerboard price increases announced for March 2026, a demand recovery, or Wallula savings beyond what has already shown up in results. After year ten, each case holds its cash flow flat with no further growth. That relies on an integrated mill-to-box network whose maintenance spending we have already deducted. The paper business is treated as shrinking, because industry shipments of uncoated freesheet fell 9.6% in 2025. Its cash flow fades to zero by year 15 in the base case and by year 8 in the bear case. In the bull case it holds for ten years and is gone by year 20. Acquired customer-relationship amortization (about $50 million in 2025 and $37 million in the first half of 2026) is added back. From 2017 to 2024, PCA amortized $36-43 million a year of earlier acquisitions' customer relationships and its business cash flow still grew, so the base case carries no extra decay. The bear case gives no growth to cover the risk that those relationships wear away. All cash flows are discounted at 6%. Debt. At mid-2026, PCA owed about $3.99 billion in face value: 3.40% notes due December 2027 ($500 million), 3.00% due December 2029 ($500 million), 5.70% due 2033 ($400 million), 5.20% due 2035 ($500 million), 4.05% due 2049 (about $400 million), 3.05% due 2051 (about $700 million), and the two $500 million term loans. It also had about $7 million of finance leases and $443 million of cash at June 30, 2026, of which we treat about $150 million as needed to run the business. Most of the fixed-rate debt costs well under 6%, and the 2049 and 2051 bonds lock that in for decades. That benefit is worth about $451 million today, so we count the debt at about $3.26 billion, or $36.54 per share. About $1.5 billion comes due in 2027-2029 and will probably be refinanced at higher rates. We only credit the low coupons up to each maturity date. Annual interest of about $170 million is covered more than four times by business cash flow even in the bear case. The cases. Bear ($100): business cash flow returns to about $8.50 per share, roughly the 2018 level and well below the recent median, reflecting the weak 2025 industry conditions (corrugated shipments down, industry containerboard inventories up 1.3%). Greif earns little, the paper mill fades out by year 8, and there is no growth. The business is worth about $12.2 billion ($136.68 per share). Less $3.26 billion of debt, that leaves $100.14 per share. Base ($150): the cycle-median level of $9.34 plus about $0.90 from Greif, with 2% growth for ten years and paper fading by year 15. The business is worth about $16.6 billion ($186.29). Less debt, that leaves $149.75. Bull ($190): the 2021-2025 median of $9.84, Greif at $1.45, 3% growth, and paper holding for ten years. The business is worth about $20.2 billion ($226.51). Less debt, that leaves $189.97. Change from our previous estimate. In August 2026 we estimated $10.96, $82.75 and $157.92 with a $57 margin-of-safety price. That analysis used discount rates of 8.5% to 12% that varied by case and assumed growth continuing forever. We now discount every case at a fixed 6%. We also value the business before debt and subtract the debt explicitly, credit the cheap long-dated bonds, and add the Greif mills' earnings. Several assumptions are now more cautious than before: growth of 0%/2%/3% instead of 1.5%/4%/6%, the paper business fading out, and a small credit for Greif. The higher values come from the method, not from more optimistic assumptions. Margin-of-safety price. The margin-of-safety price is $95. Assume the price moves toward the base value over about three years, with intrinsic value compounding at about 6% and today's dividend (second-quarter 2026 dividends paid were $135 million, up from $114 million a year earlier). Under those assumptions, the base case implies more than 20% a year from $95. If the bear case plays out, it implies high single digits a year from that price rather than a loss. The cases are reasonably close together, but the business is cyclical and carries $1.5 billion of maturities in 2027-2029, so the margin-of-safety price is set no higher. What would make this wrong. Containerboard capacity could keep growing faster than box demand and hold prices below the 2018-2025 range for years. The Greif mills could keep earning close to the 2025 run rate. Or refinancing in 2027-2029 could cost well above today's coupons. Any of these would push value toward the bear case. Sustained price increases on top of the Wallula cost savings would push it toward the bull case.