Ball Corp (BALL, Financial) has seen a daily gain of 3.45% and a three-month loss of 13.54%. The Earnings Per Share (EPS) stand at 2.52. The question at hand is whether Ball (BALL) is significantly undervalued. We aim to provide a detailed analysis of Ball's valuation, encouraging readers to delve into the comprehensive information that follows.
Company Introduction
Ball is the world's largest metal can manufacturer, with a market share exceeding 40% 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, while also investing in faster-growing emerging-market economies. Ball maintains a small presence in the U.S. defense industry through its aerospace segment. The company's stock price is currently $49.83, while its GF Value, an estimation of fair value, stands at $100.94. This discrepancy paves the way for a more profound exploration of the company's value, ingeniously integrating financial assessment with essential company details.
Understanding GF Value
The GF Value represents the current intrinsic value of a stock derived from our exclusive method. The GF Value Line on our summary page gives an overview of the fair value that the stock should be traded at. It is calculated based on three factors:
- Historical multiples (PE Ratio, PS Ratio, PB Ratio, and Price-to-Free-Cash-Flow) that the stock has traded at.
- GuruFocus adjustment factor based on the company's past returns and growth.
- Future estimates of the business performance.
At its current price of $49.83 per share, Ball stock is believed to be significantly undervalued. Because Ball is significantly undervalued, the long-term return of its stock is likely to be much higher than its business growth.
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Financial Strength
It is always important to check the financial strength of a company before buying its stock. Investing in companies with poor financial strength have a higher risk of permanent loss. Looking at the cash-to-debt ratio and interest coverage is a great way to understand the financial strength of a company. Ball has a cash-to-debt ratio of 0.09, which is worse than 79.68% of 374 companies in the Packaging & Containers industry. The overall financial strength of Ball is 4 out of 10, which indicates that the financial strength of Ball is poor.
Profitability and Growth
Companies that have been consistently profitable over the long term offer less risk for investors who may want to purchase shares. Higher profit margins usually dictate a better investment compared to a company with lower 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 Earnings Per Share (EPS) of $2.52. Its operating margin is 8.64%, which ranks better than 68.42% of 380 companies in the Packaging & Containers industry. Overall, the profitability of Ball is ranked 8 out of 10, which indicates strong profitability.
Growth is probably one of the most important factors 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. Likewise, if a company's revenue and earnings are declining, the value of the company will decrease. Ball's 3-year average revenue growth rate is better than 72.38% of 362 companies in the Packaging & Containers industry. Ball's 3-year average EBITDA growth rate is 7.4%, which ranks better than 53.33% of 345 companies in the Packaging & Containers industry.
ROIC vs WACC
Another way to evaluate a company's profitability is to compare its return on invested capital (ROIC) to its weighted cost of capital (WACC). 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. If the ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, Ball's ROIC was 6.42, while its WACC came in at 7.94.
Conclusion
In short, the stock of Ball (BALL, Financial) is believed to be significantly undervalued. The company's financial condition is poor and its profitability is strong. Its growth ranks better than 53.33% of 345 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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