Despite Ball Corp (BALL, Financial) posting a 4.68% gain in its stock and an Earnings Per Share (EPS) of $1.42, questions have arisen about its valuation status. Is the stock significantly undervalued? This article aims to address this question through a comprehensive valuation analysis. We invite readers to delve into the following examination of Ball's financial health and growth prospects.
Introduction to Ball Corp (BALL, Financial)
Ball Corp (BALL), the world's largest metal can manufacturer, holds over 40% market share in its three main regions: North America, Europe, and South America. The company is focused on increasing capacity amid a wave of new developed-market demand and investing in faster-growing emerging-market economies. Ball maintains a small presence in the U.S. defense industry through its aerospace segment. The company reports four segments—beverage packaging, North and Central America (44% of revenue), beverage packaging, EMEA (25%), beverage packaging, South America (14%), aerospace (14%)—and it generated $15.3 billion in revenue in 2022.
Understanding the GF Value of Ball (BALL, Financial)
The GF Value is a proprietary measure that estimates a stock's intrinsic value. It is calculated based on historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line on our summary page provides an overview of the fair value that the stock should ideally trade at.
According to our calculation, Ball (BALL, Financial) appears to be significantly undervalued. The stock is currently trading at $59.75 per share, with a market cap of $18.8 billion. Given its significant undervaluation, the long-term return of its stock is likely to be much higher than its business growth.
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Financial Strength of Ball Corp
Investing in companies with poor financial strength can result in a higher risk of permanent capital loss. Therefore, it's crucial to review a company's financial strength before deciding to buy its stock. Ball's cash-to-debt ratio is 0.06, which is worse than 84.37% of companies in the Packaging & Containers industry. GuruFocus ranks Ball's overall financial strength at 4 out of 10, indicating poor financial strength.
Profitability and Growth of Ball Corp
Investing in profitable companies, especially those with consistent profitability over the long term, is typically less risky. A company with high profit margins is generally a safer investment than those with low profit margins. Ball has been profitable 10 times over the past 10 years. Over the past twelve months, the company had a revenue of $15.1 billion and Earnings Per Share (EPS) of $1.42. Its operating margin is 8.62%, which ranks better than 69.32% of companies in the Packaging & Containers industry. Overall, Ball's profitability is ranked 8 out of 10, indicating strong profitability.
One of the most important factors in a company's valuation is its growth. Companies that grow faster create more value for shareholders, especially if that growth is profitable. The average annual revenue growth of Ball is 12.4%, which ranks better than 74.36% of companies in the Packaging & Containers industry. The 3-year average EBITDA growth is 7.4%, which ranks better than 53.94% of companies in the same industry.
Comparing ROIC and WACC
Another method of determining a company's profitability is to compare its return on invested capital (ROIC) to the weighted average cost of capital (WACC). ROIC measures how well a company generates cash flow relative to the capital it has invested in its business, while WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. When the ROIC is higher than the WACC, it implies the company is creating value for shareholders. For the past 12 months, Ball's ROIC is 6.53, and its WACC is 8.02.
Conclusion
In conclusion, the stock of Ball Corp (BALL, Financial) appears to be significantly undervalued. The company's financial condition is poor, but its profitability is strong. Its growth ranks better than 53.94% of companies in the Packaging & Containers industry. To learn more about Ball stock, you can check out its 30-Year Financials here.
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