Ball Corp (BALL, Financial) recently reported a daily gain of 2.3% and a 3-month loss of 0.04%. Its Earnings Per Share (EPS) (EPS) stand at 2.52. But the crucial question is, is the stock significantly undervalued? Our valuation analysis aims to provide insights into this question. We encourage you to read on for a comprehensive understanding of Ball Corp's value.
Company Overview
Ball Corp is the world's largest metal can manufacturer, boasting a market share of over 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 revenue breakdown is as follows: beverage packaging, North and Central America (44% of revenue), beverage packaging, EMEA (25%), beverage packaging, South America (14%), aerospace (14%). In 2022, it generated $15.3 billion in revenue.
Understanding GF Value
The GF Value is a proprietary measure that represents the current intrinsic value of a stock. The GF Value Line on our summary page provides an overview of the fair value that the stock should ideally 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.
We believe the GF Value Line is the fair value that the stock should be traded at. If the stock price is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher.
Looking at Ball Corp (BALL, Financial), the stock appears to be significantly undervalued based on the GF Value. The GF Value estimates the stock's fair value based on historical multiples, an internal adjustment based on the company's past business growth, and analyst estimates of future business performance. At its current price of $ 56.51 per share, Ball Corp's stock appears to be significantly undervalued.
Because Ball Corp 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
Companies with poor financial strength offer investors a high risk of permanent capital loss. To avoid this, investors must review a company's financial strength before deciding to purchase shares. Both the cash-to-debt ratio and interest coverage of a company are a great way to understand its financial strength. Ball Corp has a cash-to-debt ratio of 0.09, which ranks worse than 79.03% of companies in the Packaging & Containers industry. The overall financial strength of Ball Corp is 4 out of 10, which indicates that the financial strength of Ball Corp is poor.
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 Corp 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 69.67% of companies in the Packaging & Containers industry. Overall, the profitability of Ball Corp is ranked 8 out of 10, which indicates strong profitability.
One of the most important factors in the valuation of a company is growth. Long-term stock performance is closely correlated with growth according to GuruFocus research. Companies that grow faster create more value for shareholders, especially if that growth is profitable. The average annual revenue growth of Ball Corp is 12.4%, which ranks better than 74.15% of companies in the Packaging & Containers industry. The 3-year average EBITDA growth is 7.4%, which ranks better than 53.31% of companies in the Packaging & Containers industry.
ROIC vs WACC
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 Corp's return on invested capital is 6.42, and its cost of capital is 7.86.
Conclusion
In conclusion, the stock of Ball Corp (BALL, Financial) gives every indication of being significantly undervalued. The company's financial condition is poor and its profitability is strong. Its growth ranks better than 53.31% of companies in the Packaging & Containers industry. To learn more about Ball Corp's stock, you can check out its 30-Year Financials here.
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