Ball Corp (BALL, Financial) has recently experienced a daily gain of 3.11%, but it has suffered a 3-month loss of -6.74%. With an Earnings Per Share (EPS) of 2.52, the question arises: is the stock significantly undervalued? This article aims to provide an in-depth analysis of Ball's valuation, encouraging readers to delve into the subsequent financial assessment.
A Snapshot of Ball Corp (BALL, Financial)
As the world's largest metal can manufacturer, Ball boasts a market share of over 40% in its three main regions: North America, Europe, and South America. The company is strategically increasing its capacity to meet the surge in developed-market demand, while also investing in emerging-market economies. Ball's aerospace segment maintains a small presence in the U.S. defense industry. The company's four segments include beverage packaging in North and Central America, EMEA, and South America, as well as aerospace. In 2022, Ball generated $15.3 billion in revenue.
Despite its current price of $52.12 per share and a market cap of $16.40 billion, Ball's intrinsic value, as estimated by the GF Value, is $101.01, suggesting that the stock is significantly undervalued.
Understanding the GF Value
The GF Value is a proprietary measure that represents the current intrinsic value of a stock. It is derived from three primary factors: historical multiples at which the stock has traded, a GuruFocus adjustment factor based on past returns and growth, and future business performance estimates. The GF Value Line provides an overview of the fair value at which the stock should ideally trade.
According to GuruFocus Value calculation, Ball (BALL, Financial) is significantly undervalued. If the price of a stock is substantially 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. Given that 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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Assessing Ball's Financial Strength
Investing in companies with poor financial strength carries a higher risk of permanent capital loss. Therefore, it is crucial to carefully review a company's financial strength before deciding to buy its stock. Ball's cash-to-debt ratio of 0.09 is worse than 79.89% of 373 companies in the Packaging & Containers industry. This indicates that Ball's financial strength is poor.
Profitability and Growth of Ball
Companies that have consistently been profitable over the long term offer less risk for investors. Ball has been profitable 10 over the past 10 years. With a revenue of $14.60 billion and Earnings Per Share (EPS) of $2.52 over the past twelve months, its operating margin of 8.64% ranks better than 69.25% of 374 companies in the Packaging & Containers industry. This indicates strong profitability.
One of the most important factors in the valuation of a company is growth. The average annual revenue growth of Ball is 12.4%, which ranks better than 72.45% of 363 companies in the Packaging & Containers industry. The 3-year average EBITDA growth is 7.4%, which ranks better than 53.47% of 346 companies in the Packaging & Containers industry.
ROIC vs WACC
Comparing a company's Return on Invested Capital (ROIC) and the Weighted Average Cost of Capital (WACC) provides another perspective on its profitability. For the past 12 months, Ball's ROIC is 6.42, and its WACC is 7.88, suggesting the return on invested capital is lower than the cost of capital.
Conclusion
In conclusion, Ball (BALL, Financial) is believed to be significantly undervalued. Despite its poor financial condition, its profitability is strong. Its growth ranks better than 53.47% of 346 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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