Amazon’s Sustainability Initiatives Make This Company a Strong Buy

You may have heard Amazon’s (NASDAQ: AMZN) recent announcement that as part of its commitment to sustainability, the company is phasing out plastic air pillows in its packaging. In fact, Amazon expects that by the end of the year, it will do away with about 95% of those air pillows. This translates to around 15 billion pieces of scrap plastic each year. But obviously, shipped goods need to be protected. That’s where a tiny company you’ve probably never heard of, Ranpak Holdings (NYSE: PACK), comes in.

What's in the Bag?

Ranpak specializes in machines for filling, wrapping, and protecting shipped goods, along with the sustainable paper fillers that the machines use. As customers run out of paper, they come back to Ranpak for refills. The company currently has more than 140,000 machines placed around the United States, and Amazon is already a major customer.

With this new initiative, it’s highly likely that Amazon will come to Ranpak with a significantly bigger order. Of course, Ranpak likely won’t be the only supplier…after all, replacing 15 billion plastic air pillows per year would be a massive ask of any company. But there is real potential for Ranpak to experience rapid growth.

What the Analysts Are Saying

Ranpak’s IPO was in 2019 through a deal with a special purpose acquisition company. Since then, its profits and revenue growth have been stronger than its stock performance. However, it’s only trading at a price-to-sales ratio of 1.5, making it a low-risk option. There’s a good chance that a new Amazon deal will provide a much-needed boost. In addition, Amazon’s announcement could spur other businesses to start moving away from plastic. This means a lot of potential upside for Ranpak without much downside. It may never become an explosive stock, but it could become a strong growth opportunity.

Lisa Fritscher does not have positions in these companies. Stocks.News has positions in Amazon.