Despite a daily loss of 2.8% and a 3-month loss of 2.44%, Ball Corp (BALL, Financial) reported an Earnings Per Share (EPS) (EPS) of 2.52. This raises an intriguing question: Is Ball significantly undervalued? To answer this, we delve into a comprehensive valuation analysis. Read on to understand the financial health, profitability, and growth prospects of Ball Corp (BALL).
Company Introduction
Ball Corp (BALL, Financial) is the world's leading metal can manufacturer, boasting over 40% market share in its three main regions: North America, Europe, and South America. The company is expanding capacity to meet new developed-market demand and investing in emerging-market economies. Ball also maintains a small presence in the U.S. defense industry through its aerospace segment. The company, which generated $15.3 billion in revenue in 2022, spun-off its glass jar business in 1993, now owned by Newell.
Understanding GF Value
The GF Value is a unique measure of a stock's intrinsic value, calculated based on historical multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line provides a visual representation of the stock's fair trading value. If the stock price is significantly above the GF Value Line, it is overvalued, and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
According to GuruFocus' valuation method, Ball Corp (BALL, Financial) is significantly undervalued. With a current price of $53.04 per share and a market cap of $16.70 billion, the stock is estimated to be significantly undervalued. As a result, the long-term return of its stock is likely to be much higher than its business growth.
Link: These companies may deliver higher future returns at reduced risk.
Financial Strength
Investing in companies with low financial strength could result in permanent capital loss. Therefore, it's crucial to review a company's financial strength before deciding to buy shares. Ball has a cash-to-debt ratio of 0.09, ranking worse than 79.12% of 364 companies in the Packaging & Containers industry. Based on this, GuruFocus ranks Ball's financial strength as 4 out of 10, suggesting a poor balance sheet.
Profitability and Growth
Investing in profitable companies, especially those with consistent profitability over the long term, is less risky. A company with high profit margins is usually a safer investment than those with low profit margins. Ball has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $14.60 billion and an Earnings Per Share (EPS) of $2.52. Its operating margin is 8.64%, which ranks better than 69.4% of 366 companies in the Packaging & Containers industry. Overall, the profitability of Ball is ranked 8 out of 10, indicating strong profitability.
Growth is a critical factor in the valuation of a company. GuruFocus' research has found that growth is closely correlated with the long-term performance of a company's stock. If a company's business is growing, the company usually creates value for its shareholders, especially if the growth is profitable. Ball's 3-year average revenue growth rate is better than 74.15% of 352 companies in the Packaging & Containers industry. Ball's 3-year average EBITDA growth rate is 7.4%, which ranks better than 52.55% of 333 companies in the Packaging & Containers industry.
Another method of determining the profitability of a company is to compare its return on invested capital to the weighted average cost of capital. Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (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 return on invested capital is 6.42, and its cost of capital is 7.99.
Conclusion
In conclusion, Ball Corp (BALL, Financial) is estimated to be significantly undervalued. The company's financial condition is poor, but its profitability is strong. Its growth ranks better than 52.55% of 333 companies in the Packaging & Containers industry. To learn more about Ball stock, you can check out its 30-Year Financials here.
To find out the high-quality companies that may deliver above-average returns, please check out GuruFocus High Quality Low Capex Screener.
