Contrarian Mondi (LON:MNDI) looks good and cheap

Summary

Earlier this week, Megan introduced the idea of contrarian investing – buying quality stocks at value prices. This approach is a major theme in my own investing, so this week I want to take a closer look at a company that I think could be a classic contrarian pick at the moment.

After reporting record profits last year, FTSE 100 packaging group Mondi (LON:MNDI) is currently facing a cocktail of cyclical and company-specific headwinds. The shares are now trading at levels last seen in the 2020 crash – and prior to that, not since 2016.

The short-term headwinds are undeniable. But Mondi remains highly profitable and has a solid balance sheet. I think the shares look too cheap for a business of this quality and are likely to provide attractive medium-term returns from current levels.

Bull points:

Leading market share in Europe marketsAbove-average profitabilityStrong cash generationModest valuation with potential for re-ratingBear points:

Mondi’s largest markets are fairly matureCyclical exposure; softening demandRisk of further earnings downgradesProfile

About the stock

Mondi operates in the Basic Materials sector and...