A bag made from recycled paper.
Paper industry analysis is the evaluation of the profit potential of a business or investment in the paper industry. This form of business analysis uses industry trends, financial statements, and intangibles unique to the industry. Companies looking to expand their operations and investors looking for opportunities to raise capital through this arena employ paper industry analysis. Using such industry analyzes provides these entrepreneurs and investors with a detailed view of the history and financial health of this economic sector. They use this information to develop business models, estimate costs, and determine the probability that a company in the paper industry will be profitable.
Most forms of paper industry analysis begin with a search for facts. The investor’s goal during this stage of paper industry analysis is to understand the general nature of the field. Knowing the history of the industry, major companies, and sources of revenue helps the appraiser understand the specifics of the industry and provides the foundation for later stages of paper industry analysis. Appraisers find this general information by reading trade journals, financial magazines, and industry outlook reports published by financial analysts. This research can be done online, using library resources, or by hiring a professional.
Historically, the paper industry is made up of manufacturers, wholesalers and marketers of raw materials. Paper is processed, produced, and sold for a wide variety of uses, including education, publishing, and sanitation. Researchers will find that the productivity and growth of this industry is correlated with technological advances in the manufacturing process.
The main objective of paper industry analysis is to find the markets within the industry that increase the chances of profitability. The data collected during the research phase of the paper industry analysis makes it easy to delineate these market segments. Lenders review the balance sheets and income statements of the companies they have identified to determine how the nature of the industry and competition with other competitors impact net income. The combined revenues of these companies are indicative of the overall size of the market and consumer demand.
Directors of paper industry reviews also conduct socio-economic assessments. They must identify the laws and regulations that govern the industry to ensure their company’s compliance. Federal or state regulations also have the ability to increase the costs of doing business or limit potential profits. This stage of the paper industry analysis also reveals labor costs associated with processing raw materials, employee insurance rates, and the potential impact of unions.
Increased environmental awareness has limited the availability of raw paper and increased costs. In addition, the production of recycled paper increases manufacturing costs. The majority of personnel in the manufacturing segment of the paper industry are represented by unions, while the wholesale segment is sensitive to economic changes and can be negatively affected by declining business cycles.