Shares of Graphic Packaging Holding Company (GPK) have dropped by approximately 14% over the past month, raising investor questions about whether this leading paper-based packaging producer is now undervalued. Despite a disappointing 40.3% decline in total shareholder return over the past year, GPK’s five-year total return remains a positive 37.2%, suggesting a history of value creation over the long term.

Following this sharp decline, GPK is currently trading at around $17.29, considerably below the fair value estimate of $24.95 — indicating a potential undervaluation of 30.7%. This divergence between market price and intrinsic value is fueling renewed interest in the stock, particularly from long-term investors looking for value in the volatile packaging sector.

One of the key drivers behind this valuation gap is GPK’s recent Waco recycled paperboard investment. This strategic move enhances the company’s position in sustainable packaging by increasing its reliance on recycled paperboard and reducing dependence on costlier bleached paperboard. The shift is expected to bring higher margins and cost leadership in a market increasingly focused on environmental performance.

As demand continues to rise for eco-friendly packaging solutions, GPK appears well-positioned to benefit from changing consumer and regulatory preferences. If the company can realize the projected improvements in operating margins and earnings, the stock could offer considerable upside — particularly when viewed against industry peers with similar sustainability goals but less vertical integration.

However, there are cautionary factors to consider. The packaging industry faces persistent volume uncertainty and price pressures, especially in competitive markets. If these headwinds persist or intensify, they could undermine the more bullish earnings forecasts driving the current undervaluation thesis. In this context, the company’s pricing power and ability to navigate cost inflation will be crucial to determining whether it can close the valuation gap.

Another concern is GPK’s exposure to cyclical end markets such as food and beverage, which may see fluctuations in packaging demand due to macroeconomic factors. Investors should also watch closely for any execution risks related to the ramp-up of new recycling infrastructure and production shifts that could delay or dilute anticipated benefits.

On the positive side, GPK has attracted attention for its focus on sustainable innovation and the long-term potential of paperboard packaging as an alternative to plastics. If the company continues to align its product portfolio with ESG expectations and maintains strong cost discipline, the stock could rebound from its current lows.

In summary, while the recent drop in GPK’s share price raises valid concerns, it also presents a possible entry point for value investors betting on the growth of sustainable packaging. With the stock trading significantly below its estimated fair value and strong strategic positioning in recycled paperboard, Graphic Packaging Holding may indeed be undervalued — assuming it can deliver on its transformation plans and weather ongoing market volatility.