The first few months of this year have so far been unkind to shareholders of Sonoco Products Co. (NYSE:SON), with the stock down over 31% since January 1st. I thought I'd look in on this name to determine whether it was a good buy at these prices, or whether it's possible to make money in the options market here. I'll try to answer that question by looking at the financial history here, paying particular attention to the capital structure and the debt repayment schedule. I'll look at the stock as a thing distinct from the underlying business, and I'll recommend a specific short options trade. For those who have little interest in wading through the remainder of my article, I'll jump to the point. I think shares of Sonoco are closer to the bottom than the top, and I would be willing to take a small position in this company at current levels. Additionally, I think there's a very profitable options trade here.
Financial Snapshot
While nothing's perfect, I generally like the financial performance at Sonoco over the past five years. In particular, both revenue and net income have grown nicely in that time, and net income growth has outstripped revenue growth, suggesting that the company has been getting more efficient over time. In particular, revenue has grown at a CAGR of about 1.6%, and net income is up at a CAGR of about 3.2% over the same time period.
Management has proven themselves to be very shareholder-friendly, in that they've returned just over $914 million to owners since 2015. Only about $145 million of this came in the form of stock buybacks, and the balance came in the form of ever-growing dividend payments. I am starting to believe that dividends are a superior form of return of profits to shareholders, so I like the ratio of
