On September 22, 2023, O-I Glass Inc (OI, Financial) experienced a daily loss of 2.86%, contributing to a 3-month loss of -17.17%. Despite this, the company reported a robust Earnings Per Share (EPS) (EPS) of 3.51. Given these metrics, the question arises: Is O-I Glass fairly valued? In the subsequent analysis, we'll delve into the financials of O-I Glass and shed light on its intrinsic value.
About O-I Glass
O-I Glass Inc (OI, Financial) holds the title of the world's largest manufacturer of glass bottles, earning 70% of its revenue from markets outside the United States. The company has established a market-leading position in key regions such as Europe, North America, and Brazil. Primarily, O-I Glass caters to the beer industry, but its glass bottles are also used for wine, soda, spirits, condiments, and food. Looking ahead, O-I Glass aims to maintain or expand its dominant positions in Europe, North America, and South America. The company's current stock price is $17.27, with a market cap of $2.70 billion, aligning closely with its GF Value or fair value of $16.22.
Understanding the GF Value
The GF Value is a proprietary measure that represents the current intrinsic value of a stock. This value is derived from 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 at which the stock should ideally be traded. 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.
O-I Glass appears to be fairly valued according to GuruFocus' valuation method. The GF Value estimates the stock's fair value based on historical multiples, an internal adjustment factor based on past business growth, and analyst estimates of future business performance. At its current price of $17.27 per share, O-I Glass has a market cap of $2.70 billion, indicating that the stock is fairly valued.
As O-I Glass is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth.
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Financial Strength
Investing in companies with poor financial strength carries a higher risk of permanent loss of capital. Hence, a careful review of a company's financial strength is crucial before deciding to buy its stock. Looking at the cash-to-debt ratio and interest coverage can provide a good understanding of a company's financial strength. O-I Glass has a cash-to-debt ratio of 0.15, which is worse than 70.93% of 375 companies in the Packaging & Containers industry. GuruFocus ranks the overall financial strength of O-I Glass at 4 out of 10, indicating that the financial strength of O-I Glass is poor.
Profitability and Growth
Investing in profitable companies, especially those with consistent long-term profitability, poses less risk. A company with high profit margins is also typically a safer investment than one with low profit margins. O-I Glass has been profitable 9 over the past 10 years. Over the past twelve months, the company had a revenue of $7.10 billion and Earnings Per Share (EPS) of $3.51. Its operating margin is 11.68%, which ranks better than 83.99% of 381 companies in the Packaging & Containers industry. Overall, GuruFocus ranks the profitability of O-I Glass at 7 out of 10, indicating fair profitability.
Growth is an essential factor in the valuation of a company. GuruFocus research has found that growth is closely correlated with the long-term stock performance of a company. A faster-growing company creates more value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth of O-I Glass is 0%, which ranks worse than 0% of 363 companies in the Packaging & Containers industry. The 3-year average EBITDA growth rate is 38.6%, which ranks better than 89.6% of 346 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, O-I Glass's ROIC was 8.93, while its WACC came in at 5.68.
Conclusion
In conclusion, the stock of O-I Glass appears to be fairly valued. The company's financial condition is poor, but its profitability is fair. Its growth ranks better than 89.6% of 346 companies in the Packaging & Containers industry. To learn more about O-I Glass stock, you can check out its 30-Year Financials here.
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