Friday newspaper share tips: Looking inside Mondi's packaging

Yesterday The Telegraph’s Questor noted that shares in the FTSE 100 packaging and paper giant have drifted down since August after fears Europe is slowing down as well as a note from Goldman Sachs in September advising traders to sell.

Despite the shares being exposed to the rollercoaster of the business cycle due to the company’s fixed cost-base, Questor thinks it should be able to negotiate a tougher trading environment.

It said Mondi has more than doubled its profits and dividend in the last four years, but the problem now is it’s looking expensive.

“In the year to date the shares have gained 38pc compared to the FTSE 100 down 3pc, and are now trading on 15 times forecast earnings per share.”

Questor thought it was a solid company but the rating feels too high for a “cyclical industry play”. It is sticking with its hold recommendation which it advised in August.

The Times' Tempus is taking a slightly more optimistic view, saying the company defied fears after it posted a 27% rise in underlying third quarter profit and highlighted a good performance from all its business units. It noted input prices are stable, paper prices across the range are stable to rising, and volumes are up.

It also highlighted that the company has some ambitious spending plans, with €1.15bn a year for the next two years covered by cashflow.

“The question is when it will have excess capital to hand back to investors, and this will depend on spending plans in 2017 and 2018, to be decided next year and themselves dependent on the state of the market.”

Tempus said the shares have come up a long way and aren’t cheap, but recommends it’s a long term buy.