Ball Corporation Valuation – February 2019 $BLL

Company Profile (excerpt from Reuters): Ball Corporation (Ball), incorporated on December 19, 1922, is a supplier of metal packaging to the beverage, food, personal care and household products industries. The Company’s packaging products are produced for a range of end uses and are manufactured in facilities around the world. Its segments include beverage packaging, North and Central America; beverage packaging, South America; beverage packaging, Europe; food and aerosol packaging; aerospace, and other. Its major product line is aluminum and steel beverage containers. It also produces steel food, aerosol containers, extruded aluminum aerosol containers and aluminum slugs. It sells its packaging products to multinational beverage, food, personal care and household products companies. Its aerospace business is engaged in the design, development and manufacture of aerospace systems for civil, commercial and national cyber security aerospace markets. It produces spacecraft, instruments and sensors, radio frequency systems and components, data exploitation solutions and a range of aerospace technologies and products.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of BLL – February 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $18,465,563,018 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.96 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 20.83% Fail
6. Moderate PEmg Ratio PEmg < 20 36.45 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.30 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.96 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -42.00 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.50
MG Growth Estimate 2.25%
MG Value $19.42
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $21.68
MG Value based on 0% Growth $12.71
Market Implied Growth Rate 13.97%
Current Price $54.50
% of Intrinsic Value 280.58%

Ball Corporation does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $1.3 in 2015 to an estimated $1.5 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 13.97% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Ball Corporation revealed the company was trading above its Graham Number of $23.31. The company pays a dividend of $0.4 per share, for a yield of 0.7% Its PEmg (price over earnings per share – ModernGraham) was 36.45, which was above the industry average of 17.32. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-26.14.

Ball Corporation scores quite poorly in the ModernGraham grading system, with an overall grade of F.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$26.14
Graham Number $23.31
PEmg 36.45
Current Ratio 0.96
PB Ratio 5.30
Current Dividend $0.40
Dividend Yield 0.73%
Number of Consecutive Years of Dividend Growth 2

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $3,940,000,000
Total Current Liabilities $4,095,000,000
Long-Term Debt $6,510,000,000
Total Assets $16,554,000,000
Intangible Assets $6,663,000,000
Total Liabilities $12,992,000,000
Shares Outstanding (Diluted Average) 346,274,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.30
Dec2018 $1.29
Dec2017 $1.05
Dec2016 $0.81
Dec2015 $1.00
Dec2014 $1.65
Dec2013 $1.37
Dec2012 $1.25
Dec2011 $1.32
Dec2010 $1.28
Dec2009 $1.02
Dec2008 $0.83
Dec2007 $0.69
Dec2006 $0.79
Dec2005 $0.62
Dec2004 $0.66
Dec2003 $0.50
Dec2002 $0.34
Dec2001 -$0.12
Dec2000 $0.03
Dec1999 $0.10

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.50
Dec2018 $1.12
Dec2017 $1.08
Dec2016 $1.13
Dec2015 $1.30
Dec2014 $1.42
Dec2013 $1.29
Dec2012 $1.21
Dec2011 $1.14
Dec2010 $1.01
Dec2009 $0.84
Dec2008 $0.74
Dec2007 $0.68
Dec2006 $0.65
Dec2005 $0.52
Dec2004 $0.41
Dec2003 $0.25

Recommended Reading:

Other ModernGraham posts about the company

Ball Corporation Valuation – April 2018 $BLL
Ball Corporation Valuation – December 2016 $BLL
Ball Corporation Analysis – 2015 Update $BLL
19 Companies in the Spotlight This Week – 8/9/14
Ball Corporation Annual Valuation – 2014 $BLL

Other ModernGraham posts about related companies

Westrock Co Valuation – February 2019 $WRK
Sealed Air Corp Valuation – February 2019 $SEE
Packaging Corp of America Valuation – January 2019 $PKG
Schweitzer-Mauduit International Inc Valuation – September 2018 $SWM
KapStone Paper and Packaging Corp Valuation – August 2018 $KS
Sonoco Products Co Valuation – August 2018 $SON
Silgan Holdings Inc Valuation – August 2018 $SLGN
Clearwater Paper Corp Valuation – July 2018 $CLW
Intertape Polymer Group Valuation – July 2018 $TSE-ITP
Bemis Co Inc Valuation – June 2018 $BMS

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Ball Corporation Valuation – April 2018 $BLL

Company Profile (excerpt from Reuters): Ball Corporation (Ball), incorporated on December 19, 1922, is a supplier of metal packaging to the beverage, food, personal care and household products industries. The Company’s packaging products are produced for a range of end uses and are manufactured in facilities around the world. Its segments include beverage packaging, North and Central America; beverage packaging, South America; beverage packaging, Europe; food and aerosol packaging; aerospace, and other. Its major product line is aluminum and steel beverage containers. It also produces steel food, aerosol containers, extruded aluminum aerosol containers and aluminum slugs. It sells its packaging products to multinational beverage, food, personal care and household products companies. Its aerospace business is engaged in the design, development and manufacture of aerospace systems for civil, commercial and national cyber security aerospace markets. It produces spacecraft, instruments and sensors, radio frequency systems and components, data exploitation solutions and a range of aerospace technologies and products.

BLL Chart

BLL data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of BLL – April 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $14,168,369,726 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.92 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 8.31% Fail
6. Moderate PEmg Ratio PEmg < 20 29.63 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.63 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.92 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -18.68 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.37
MG Growth Estimate -0.59%
MG Value $10.03
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $19.85
MG Value based on 0% Growth $11.63
Market Implied Growth Rate 10.56%
Current Price $40.55
% of Intrinsic Value 404.33%

Ball Corporation does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $1.42 in 2014 to an estimated $1.37 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 10.56% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Ball Corporation revealed the company was trading above its Graham Number of $22.79. The company pays a dividend of $0.37 per share, for a yield of 0.9% Its PEmg (price over earnings per share – ModernGraham) was 29.63, which was above the industry average of 24.07. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-26.87.

Ball Corporation scores quite poorly in the ModernGraham grading system, with an overall grade of F.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$26.87
Graham Number $22.79
PEmg 29.63
Current Ratio 0.92
PB Ratio 3.63
Current Dividend $0.37
Dividend Yield 0.90%
Number of Consecutive Years of Dividend Growth 1

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Total Current Assets $3,758,000,000
Total Current Liabilities $4,107,000,000
Long-Term Debt $6,518,000,000
Total Assets $17,169,000,000
Intangible Assets $7,395,000,000
Total Liabilities $13,228,000,000
Shares Outstanding (Diluted Average) 352,464,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.05
Dec2017 $1.05
Dec2016 $0.81
Dec2015 $1.00
Dec2014 $1.65
Dec2013 $1.37
Dec2012 $1.25
Dec2011 $1.32
Dec2010 $1.28
Dec2009 $1.02
Dec2008 $0.83
Dec2007 $0.69
Dec2006 $0.79
Dec2005 $0.62
Dec2004 $0.66
Dec2003 $0.50
Dec2002 $0.34
Dec2001 -$0.23
Dec2000 $0.13
Dec1999 $0.20
Dec1998 $0.03

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.37
Dec2017 $1.08
Dec2016 $1.13
Dec2015 $1.30
Dec2014 $1.42
Dec2013 $1.29
Dec2012 $1.21
Dec2011 $1.14
Dec2010 $1.01
Dec2009 $0.84
Dec2008 $0.74
Dec2007 $0.68
Dec2006 $0.65
Dec2005 $0.51
Dec2004 $0.40
Dec2003 $0.24
Dec2002 $0.11

Recommended Reading:

Other ModernGraham posts about the company

Ball Corporation Valuation – December 2016 $BLL
Ball Corporation Analysis – 2015 Update $BLL
19 Companies in the Spotlight This Week – 8/9/14
Ball Corporation Annual Valuation – 2014 $BLL

Other ModernGraham posts about related companies

WestRock Co Valuation – April 2018 $WRK
Sealed Air Corp Valuation – April 2018 $SEE
Packaging Corp of America Valuation – Initial Coverage $PKG
AptarGroup Inc Valuation – Initial Coverage $ATR
Tredegar Corp Valuation – Initial Coverage $TG
International Paper Co Valuation – March 2017 $IP
Schweitzer-Mauduit International Inc Valuation – Initial Coverage $SWM
KapStone Paper and Packaging Corp Valuation – Initial Coverage $KS
Sonoco Products Co Valuation – Initial Coverage $SON
Silgan Holdings Inc Valuation – Initial Coverage $SLGN

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Ball Corporation Valuation – December 2016 $BLL

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – December 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Ball Corporation (BLL) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Ball Corporation (Ball) is a supplier of metal packaging to the beverage, food, personal care and household products industries. The Company’s packaging products are produced for a range of end uses and are manufactured in facilities around the world. The Company operates in four segments: metal beverage packaging, Americas and Asia; metal beverage packaging, Europe; metal food and household products packaging, and aerospace and technologies. Its product lines include aluminum and steel beverage containers. The Company also produces steel food, aerosol, paint, general line and decorative specialty containers, as well as extruded aluminum aerosol and beverage containers and aluminum slugs. The Company sells its packaging products to multinational beverage, food, personal care and household products companies. Its aerospace business is engaged in the designing, development and manufacturing of aerospace systems for civil, commercial and national security aerospace markets.

BLL Chart

BLL data by YCharts

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Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Recent valuations of the components of the Dow Jones Industrial Average are available for free members, including this one of Microsoft Corporation.  In addition, here is a post detailing what can be found within each individual company’s valuation.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of BLL – December 2016

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $13,474,457,660 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.39 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 48.02% Pass
6. Moderate PEmg Ratio PEmg < 20 31.09 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.65 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.39 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 6.65 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $2.45
MG Growth Estimate 0.17%
MG Value $21.71
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $35.59
MG Value based on 0% Growth $20.86
Market Implied Growth Rate 11.29%
Current Price $76.31
% of Intrinsic Value 351.43%

Ball Corporation does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $2.43 in 2012 to an estimated $2.45 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 11.29% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Ball Corporation revealed the company was trading above its Graham Number of $32.43. The company pays a dividend of $0.52 per share, for a yield of 0.7% Its PEmg (price over earnings per share – ModernGraham) was 31.09, which was below the industry average of 53.08, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-52.01.

Ball Corporation scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$52.01
Graham Number $32.43
PEmg 31.09
Current Ratio 1.39
PB Ratio 3.65
Current Dividend $0.52
Dividend Yield 0.68%
Number of Consecutive Years of Dividend Growth 0

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Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2016
Total Current Assets $4,104,000,000
Total Current Liabilities $2,943,000,000
Long-Term Debt $7,724,000,000
Total Assets $17,060,000,000
Intangible Assets $7,257,000,000
Total Liabilities $13,347,000,000
Shares Outstanding (Diluted Average) 177,702,000

Earnings Per Share History

Next Fiscal Year Estimate $2.20
Dec2015 $1.99
Dec2014 $3.30
Dec2013 $2.73
Dec2012 $2.50
Dec2011 $2.63
Dec2010 $2.55
Dec2009 $2.04
Dec2008 $1.65
Dec2007 $1.37
Dec2006 $1.57
Dec2005 $1.24
Dec2004 $1.33
Dec2003 $1.01
Dec2002 $0.68
Dec2001 -$0.46
Dec2000 $0.27
Dec1999 $0.40
Dec1998 $0.06
Dec1997 $0.22
Dec1996 $0.09

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $2.45
Dec2015 $2.60
Dec2014 $2.85
Dec2013 $2.58
Dec2012 $2.43
Dec2011 $2.28
Dec2010 $2.01
Dec2009 $1.69
Dec2008 $1.48
Dec2007 $1.37
Dec2006 $1.30
Dec2005 $1.03
Dec2004 $0.80
Dec2003 $0.48
Dec2002 $0.21
Dec2001 $0.02
Dec2000 $0.24

Recommended Reading:

Other ModernGraham posts about the company

Ball Corporation Analysis – 2015 Update $BLL
19 Companies in the Spotlight This Week – 8/9/14
Ball Corporation Annual Valuation – 2014 $BLL

Other ModernGraham posts about related companies

WestRock Co Valuation – August 2016 $WRK
Bemis Company Inc Valuation – July 2016 $BMS
Owens-Illinois Inc Valuation – June 2016 $OI
Bemis Co Inc Valuation – January 2016 Update $BMS
WestRock Co Valuation – January 2016 Update $WRK
International Paper Co Valuation – December 2015 Update $IP
Bemis Company Inc. Analysis – September 2015 Update $BMS
WestRock Co. Analysis – Initial Coverage $WRK
International Paper Company Analysis – September 2015 Update $IP
Ball Corporation Analysis – 2015 Update $BLL

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Ball Corporation Analysis – 2015 Update $BLL

145px-Logo_Ball_Corporation.svgBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Most Undervalued Companies for the Defensive Investor – July 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Ball Corporation (BLL) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Ball Corporation (Ball) is a supplier of metal packaging to the beverage, food, personal care and household products industries. The Company operates in four segments. The metal beverage packaging, Americas and Asia segment consists of operations in the United States, Canada, Brazil and the PRC, which manufacture aluminum containers used in beverage packaging. . The metal beverage packaging, Europe segment consists of operations in Europe, which manufacture and sell metal beverage containers. The metal food and household products packaging segment consists of operations in the United States, Europe, Canada, Mexico and Argentina that manufacture and sell metal food, aerosol, paint, general line and extruded aluminum containers, decorative specialty containers and aluminum slugs. The aerospace and technologies segment consists of the manufacture and sale of aerospace and other related products and services provided for the defense, civil space and commercial space industries.

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Defensive Investor – must pass at least 6 of the following 7 tests: Score = 4/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – FAIL
  3. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – PASS
  6. Moderate PEmg ratio – PEmg is less than 20 – FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 3/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – FAIL
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – FAIL
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $69.32
MG Value $84.75
MG Opinion Fairly Valued
Value Based on 3% Growth $41.60
Value Based on 0% Growth $24.38
Market Implied Growth Rate 7.83%
Net Current Asset Value (NCAV) -$29.75
PEmg 24.16
Current Ratio 1.14
PB Ratio 8.61

Balance Sheet – June 2015

Current Assets $2,505,000,000
Current Liabilities $2,192,000,000
Total Debt $2,982,000,000
Total Assets $7,853,000,000
Intangible Assets $2,411,000,000
Total Liabilities $6,714,000,000
Outstanding Shares 141,500,000

Earnings Per Share

2015 (estimate) $2.90
2014 $3.30
2013 $2.73
2012 $2.55
2011 $2.04
2010 $1.65
2009 $1.37
2008 $1.57
2007 $1.24
2006 $1.33
2005 $1.01

Earnings Per Share – ModernGraham

2015 (estimate) $2.87
2014 $2.72
2013 $2.31
2012 $2.01
2011 $1.69
2010 $1.48

Dividend History

Free Cash Flow

Conclusion:

Ball Corporation does not qualify for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned with the low current ratio, and the high PEmg and PB ratios.  The Enterprising Investor is concerned by the level of debt relative to the current assets.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities or proceed very cautiously with a speculative attitude.  As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $1.69 in 2011 to an estimated $2.87 for 2015.  This level of demonstrated earnings growth supports the market’s implied estimate of 7.83% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Ball Corporation (BLL)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

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Ball Corporation Annual Valuation – 2014 $BLL

145px-Logo_Ball_Corporation.svgBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Undervalued Companies for the Defensive Investor with High Dividend Yields.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Ball Corporation (BLL) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Ball Corporation (Ball) is a supplier of metal packaging to the beverage, food, personal care and household products industries. The Company operates in four segments: metal beverage packaging, Americas and Asia; metal beverage packaging, Europe; metal food and household products packaging, Americas, and aerospace and technologies. Ball also provides aerospace and other technologies and services to governmental and commercial customers within its aerospace and technologies segment. Its product lines are aluminum and steel beverage containers. Ball also produces steel food containers and steel and aluminum aerosol containers for beverages, food, personal care and household products, as well as steel paint cans, decorative steel tins and aluminum slugs. In December 2012, the Company acquired Envases del Plata S.A. de C.V. During the year ended December 31, 2012, the Company acquired Tubettificio Europeo S.p.A. (Tubettificio).
BLL Chart

BLL data by YCharts

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 3/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – FAIL
  3. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – FAIL
  6. Moderate PEmg ratio – PEmg is less than 20 – FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 3/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – FAIL
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – FAIL
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $62.64
MG Value $33.07
MG Opinion Overvalued
Value Based on 3% Growth $21.49
Value Based on 0% Growth $12.60
Market Implied Growth Rate 16.88%
Net Current Asset Value (NCAV) -$30.59
PEmg 42.27
Current Ratio 1.32
PB Ratio 8.08

Balance Sheet – 3/31/2014

Current Assets $2,404,300,000
Current Liabilities $1,821,300,000
Total Debt $3,357,700,000
Total Assets $7,744,500,000
Intangible Assets $2,622,900,000
Total Liabilities $6,664,900,000
Outstanding Shares 139,300,000

Earnings Per Share 

2014 (estimate) $3.74
2013 $0.10
2012 $0.48
2011 $0.60
2010 $0.49
2009 $1.22
2008 $1.35
2007 $1.26
2006 $1.32
2005 $1.06
2004 $1.38

Earnings Per Share – ModernGraham

2014 (estimate) $1.48
2013 $0.43
2012 $0.67
2011 $0.84
2010 $1.01
2009 $1.27

Dividend History
BLL Dividend Chart

BLL Dividend data by YCharts

Conclusion:

Ball Corporation is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned by the low current ratio, lack of sufficient earnings growth over the last ten years, and the high PEmg and PB ratios.  The Enterprising Investor has an issue with the high level of debt relative to the current assets.  As a result, value investors  following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities.  From a valuation side of things, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $1.01 in 2010 to only an estimated $1.48 for 2014.  This low level of demonstrated growth does not support the market’s implied estimate of 16.88% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value below the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Ball Corporation (BLL)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in Ball Corporation (BLL) or in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

International Paper Co Valuation – March 2019 #IP

Company Profile (excerpt from Reuters): International Paper Company, incorporated on June 23, 1941, is a paper and packaging company with primary markets and manufacturing operations in North America, Europe, Latin America, Russia, Asia, Africa and the Middle East. The Company’s segments include Industrial Packaging, Global Cellulose Fibers, Printing Papers and Consumer Packaging. As of December 31, 2016, the Company operated 29 pulp, paper and packaging mills, 170 converting and packaging plants, 16 recycling plants and three bag facilities in the United States. As of December 31, 2016, the production facilities in Canada, Europe, Asia, Africa, India, Latin America included 17 pulp, paper and packaging mills, 68 converting and packaging plants, and two recycling plants. As of December 31, 2016, the Company operated a printing and packaging products distribution business principally through 12 branches in Asia. The Company sells packaging products, paper products and other products directly to end users and converters, as well as through agents, resellers and paper distributors.

IP Chart

IP data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of IP – March 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $17,950,583,989 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.49 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 129.44% Pass
6. Moderate PEmg Ratio PEmg < 20 10.33 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.48 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.49 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 4.35 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $4.34
MG Growth Estimate 15.00%
MG Value $167.17
Opinion Undervalued
MG Grade B+
MG Value based on 3% Growth $62.96
MG Value based on 0% Growth $36.91
Market Implied Growth Rate 0.91%
Current Price $44.85
% of Intrinsic Value 26.83%

International Paper Co qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the low current ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.15 in 2015 to an estimated $4.34 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.91% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into International Paper Co revealed the company was trading above its Graham Number of $44.07. The company pays a dividend of $1.93 per share, for a yield of 4.3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 10.33, which was below the industry average of 17, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-47.06.

International Paper Co performs fairly well in the ModernGraham grading system, scoring a B+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$47.06
Graham Number $44.07
PEmg 10.33
Current Ratio 1.49
PB Ratio 2.48
Current Dividend $1.93
Dividend Yield 4.29%
Number of Consecutive Years of Dividend Growth 9

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $6,996,000,000
Total Current Liabilities $4,694,000,000
Long-Term Debt $10,015,000,000
Total Assets $33,576,000,000
Intangible Assets $3,374,000,000
Total Liabilities $26,193,000,000
Shares Outstanding (Diluted Average) 407,900,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.75
Dec2018 $4.85
Dec2017 $5.13
Dec2016 $2.18
Dec2015 $2.23
Dec2014 $1.29
Dec2013 $3.11
Dec2012 $1.80
Dec2011 $3.03
Dec2010 $1.59
Dec2009 $1.55
Dec2008 -$3.05
Dec2007 $2.70
Dec2006 $2.18
Dec2005 $2.21
Dec2004 -$0.07
Dec2003 $0.63
Dec2002 -$1.83
Dec2001 -$2.50
Dec2000 $0.32
Dec1999 $0.44

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.34
Dec2018 $3.80
Dec2017 $3.12
Dec2016 $2.11
Dec2015 $2.15
Dec2014 $2.13
Dec2013 $2.44
Dec2012 $1.73
Dec2011 $1.52
Dec2010 $0.84
Dec2009 $0.68
Dec2008 $0.43
Dec2007 $1.96
Dec2006 $1.26
Dec2005 $0.43
Dec2004 -$0.53
Dec2003 -$0.71

Recommended Reading:

Other ModernGraham posts about the company

10 Undervalued Companies for the Defensive Dividend Stock Investor – February 2019
10 Undervalued Companies for the Defensive Dividend Stock Investor – July 2018
International Paper Co Valuation – June 2018 $IP
International Paper Co Valuation – March 2017 $IP
International Paper Co Valuation – December 2015 Update $IP

Other ModernGraham posts about related companies

Ball Corporation Valuation – February 2019 $BLL
Westrock Co Valuation – February 2019 $WRK
Sealed Air Corp Valuation – February 2019 $SEE
Packaging Corp of America Valuation – January 2019 $PKG
Schweitzer-Mauduit International Inc Valuation – September 2018 $SWM
KapStone Paper and Packaging Corp Valuation – August 2018 $KS
Sonoco Products Co Valuation – August 2018 $SON
Silgan Holdings Inc Valuation – August 2018 $SLGN
Clearwater Paper Corp Valuation – July 2018 $CLW
Intertape Polymer Group Valuation – July 2018 $TSE-ITP

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Packaging Corp of America Valuation – January 2019 $PKG

Company Profile (excerpt from Reuters): Packaging Corporation of America (PCA), incorporated on January 25, 1999, is a producer of containerboard products and uncoated freesheet. The Company operates through three segments: Packaging, Paper, and Corporate and Other. The Packaging segment produces a range of corrugated packaging products. The Paper segment manufactures and sells a range of papers, including communication-based papers and pressure sensitive papers. As of December 31, 2016, the Company operated five containerboard mills, three paper mills and 94 corrugated products manufacturing plants.

Downloadable PDF version of this valuation:

ModernGraham Valuation of PKG – January 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $8,853,452,267 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.76 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 217.02% Pass
6. Moderate PEmg Ratio PEmg < 20 14.93 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.48 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.76 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.84 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $6.28
MG Growth Estimate 14.37%
MG Value $233.77
Opinion Undervalued
MG Grade B+
MG Value based on 3% Growth $91.02
MG Value based on 0% Growth $53.36
Market Implied Growth Rate 3.21%
Current Price $93.70
% of Intrinsic Value 40.08%

Packaging Corp Of America qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the high PB ratio. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $3.21 in 2014 to an estimated $6.28 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.21% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Packaging Corp Of America revealed the company was trading above its Graham Number of $63.49. The company pays a dividend of $2.52 per share, for a yield of 2.7%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 14.93, which was below the industry average of 15.32, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-19.74.

Packaging Corp Of America performs fairly well in the ModernGraham grading system, scoring a B+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$19.74
Graham Number $63.49
PEmg 14.93
Current Ratio 2.76
PB Ratio 3.48
Current Dividend $2.52
Dividend Yield 2.69%
Number of Consecutive Years of Dividend Growth 7

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $2,114,700,000
Total Current Liabilities $766,500,000
Long-Term Debt $2,482,900,000
Total Assets $6,500,000,000
Intangible Assets $1,262,600,000
Total Liabilities $3,969,800,000
Shares Outstanding (Diluted Average) 94,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $7.74
Dec2017 $7.07
Dec2016 $4.75
Dec2015 $4.47
Dec2014 $3.99
Dec2013 $4.52
Dec2012 $1.64
Dec2011 $1.57
Dec2010 $2.00
Dec2009 $2.60
Dec2008 $1.31
Dec2007 $1.61
Dec2006 $1.20
Dec2005 $0.49
Dec2004 $0.64
Dec2003 -$0.14
Dec2002 $0.45
Dec2001 $0.98
Dec2000 $1.33
Dec1999 $0.32
Dec1998 $0.76

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $6.28
Dec2017 $5.35
Dec2016 $4.29
Dec2015 $3.78
Dec2014 $3.21
Dec2013 $2.70
Dec2012 $1.80
Dec2011 $1.86
Dec2010 $1.92
Dec2009 $1.73
Dec2008 $1.21
Dec2007 $1.03
Dec2006 $0.67
Dec2005 $0.43
Dec2004 $0.49
Dec2003 $0.47
Dec2002 $0.77

Recommended Reading:

Other ModernGraham posts about the company

5 Undervalued Companies for the Defensive Investor Near 52 Week Lows – August 2018
5 Undervalued Stocks for Value Investors with a High Beta – July 2018
Packaging Corp of America Valuation – Initial Coverage $PKG

Other ModernGraham posts about related companies

Schweitzer-Mauduit International Inc Valuation – September 2018 $SWM
KapStone Paper and Packaging Corp Valuation – August 2018 $KS
Sonoco Products Co Valuation – August 2018 $SON
Silgan Holdings Inc Valuation – August 2018 $SLGN
Clearwater Paper Corp Valuation – July 2018 $CLW
Intertape Polymer Group Valuation – July 2018 $TSE-ITP
Bemis Co Inc Valuation – June 2018 $BMS
Owens-Illinois Inc Valuation – June 2018 $OI
International Paper Co Valuation – June 2018 $IP
Ball Corporation Valuation – April 2018 $BLL

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Schweitzer-Mauduit International Inc Valuation – September 2018 $SWM

Company Profile (excerpt from Reuters): Schweitzer-Mauduit International, Inc. (SWM), incorporated on August 21, 1995, is a diversified producer of engineered solutions and materials for a variety of industries. The Company has two operating product line segments: Engineered Papers, and Advanced Materials and Structures. As of December 31, 2016, the Company conducted business in over 90 countries and operate 18 production locations across the world, with facilities in the United States, Canada, the United Kingdom, France, Luxembourg, Russia, Brazil, China and Poland.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SWM – September 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $1,231,218,084 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.98 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 22.72% Fail
6. Moderate PEmg Ratio PEmg < 20 16.41 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.27 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.98 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.37 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.44
MG Growth Estimate -0.96%
MG Value $16.07
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $35.37
MG Value based on 0% Growth $20.73
Market Implied Growth Rate 3.96%
Current Price $40.03
% of Intrinsic Value 249.07%

Schweitzer-Mauduit International, Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, insufficient earnings growth over the last ten years. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of earnings growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $2.61 in 2014 to an estimated $2.44 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 3.96% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Schweitzer-Mauduit International, Inc. revealed the company was trading above its Graham Number of $34.89. The company pays a dividend of $1.69 per share, for a yield of 4.2%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 16.41, which was below the industry average of 20.11, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-17.46.

Schweitzer-Mauduit International, Inc. scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$17.46
Graham Number $34.89
PEmg 16.41
Current Ratio 2.98
PB Ratio 2.27
Current Dividend $1.69
Dividend Yield 4.22%
Number of Consecutive Years of Dividend Growth 6

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2018
Total Current Assets $406,400,000
Total Current Liabilities $136,200,000
Long-Term Debt $639,800,000
Total Assets $1,485,100,000
Intangible Assets $624,400,000
Total Liabilities $942,600,000
Shares Outstanding (Diluted Average) 30,706,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.04
Dec2017 $1.12
Dec2016 $2.70
Dec2015 $2.94
Dec2014 $2.93
Dec2013 $2.42
Dec2012 $2.51
Dec2011 $2.73
Dec2010 $1.76
Dec2009 $1.10
Dec2008 $0.02
Dec2007 $0.11
Dec2006 -$0.03
Dec2005 $0.63
Dec2004 $1.18
Dec2003 $1.11
Dec2002 $1.09
Dec2001 $0.82
Dec2000 $0.91
Dec1999 $0.98
Dec1998 $0.96

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.44
Dec2017 $2.23
Dec2016 $2.76
Dec2015 $2.76
Dec2014 $2.61
Dec2013 $2.33
Dec2012 $2.06
Dec2011 $1.61
Dec2010 $0.90
Dec2009 $0.43
Dec2008 $0.19
Dec2007 $0.39
Dec2006 $0.62
Dec2005 $0.94
Dec2004 $1.07
Dec2003 $1.01
Dec2002 $0.96

Recommended Reading:

Other ModernGraham posts about the company

5 Best Stocks for Value Investors This Week – 3/18/17
Schweitzer-Mauduit International Inc Valuation – Initial Coverage $SWM

Other ModernGraham posts about related companies

KapStone Paper and Packaging Corp Valuation – August 2018 $KS
Sonoco Products Co Valuation – August 2018 $SON
Silgan Holdings Inc Valuation – August 2018 $SLGN
Clearwater Paper Corp Valuation – July 2018 $CLW
Intertape Polymer Group Valuation – July 2018 $TSE-ITP
Bemis Co Inc Valuation – June 2018 $BMS
Owens-Illinois Inc Valuation – June 2018 $OI
International Paper Co Valuation – June 2018 $IP
Ball Corporation Valuation – April 2018 $BLL
WestRock Co Valuation – April 2018 $WRK

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

KapStone Paper and Packaging Corp Valuation – August 2018 $KS

Company Profile (excerpt from Reuters): KapStone Paper and Packaging Corporation, incorporated on April 15, 2005, is a producer of containerboard and the kraft paper in North America. The Company operates through two segments: Paper and Packaging, and Distribution. The Paper and Packaging segment manufactures and sells a range of containerboard, corrugated products and specialty paper for industrial and consumer markets. The Distribution segment, which operates under the Victory and Golden State Container trade names, provides its customers packaging solutions and services and distributes corrugated packaging materials and other specialty packaging products, which include stretch film, void fill, carton sealing tape and other specialty tapes. It produces a range of products ranging from basic corrugated shipping containers to specialized packaging. It produces packaging for fresh fruit and vegetables, processed food, beverages, and other industrial and consumer products.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of KS – August 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $3,356,767,670 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.24 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 117.27% Pass
6. Moderate PEmg Ratio PEmg < 20 19.23 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.83 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.24 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.79 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.78
MG Growth Estimate 7.26%
MG Value $41.08
Opinion Fairly Valued
MG Grade C+
MG Value based on 3% Growth $25.87
MG Value based on 0% Growth $15.16
Market Implied Growth Rate 5.37%
Current Price $34.31
% of Intrinsic Value 83.52%

KapStone Paper and Packaging Corp. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the poor dividend history, and the high PB ratio. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $1.2 in 2014 to an estimated $1.78 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 5.37% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into KapStone Paper and Packaging Corp. revealed the company was trading above its Graham Number of $23.3. The company pays a dividend of $0.4 per share, for a yield of 1.2% Its PEmg (price over earnings per share – ModernGraham) was 19.23, which was below the industry average of 21.21, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-12.79.

KapStone Paper and Packaging Corp. receives an average overall rating in the ModernGraham grading system, scoring a C+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$12.79
Graham Number $23.30
PEmg 19.23
Current Ratio 2.24
PB Ratio 2.83
Current Dividend $0.40
Dividend Yield 1.17%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2018
Total Current Assets $894,068,000
Total Current Liabilities $399,183,000
Long-Term Debt $1,382,968,000
Total Assets $3,388,143,000
Intangible Assets $1,002,598,000
Total Liabilities $2,173,644,000
Shares Outstanding (Diluted Average) 100,044,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.06
Dec2017 $2.47
Dec2016 $0.88
Dec2015 $1.09
Dec2014 $1.76
Dec2013 $1.32
Dec2012 $0.65
Dec2011 $0.66
Dec2010 $0.69
Dec2009 $1.15
Dec2008 $0.29
Dec2007 $0.38
Dec2006 $0.04
Dec2005 $0.03

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.78
Dec2017 $1.60
Dec2016 $1.16
Dec2015 $1.23
Dec2014 $1.20
Dec2013 $0.91
Dec2012 $0.70
Dec2011 $0.69
Dec2010 $0.64
Dec2009 $0.54
Dec2008 $0.21
Dec2007 $0.14
Dec2006 $0.02
Dec2005 $0.01

Recommended Reading:

Other ModernGraham posts about the company

5 Best Stocks for Value Investors This Week – 2/25/17
KapStone Paper and Packaging Corp Valuation – Initial Coverage $KS

Other ModernGraham posts about related companies

Sonoco Products Co Valuation – August 2018 $SON
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Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Sonoco Products Co Valuation – August 2018 $SON

Company Profile (excerpt from Reuters): Sonoco Products Company (Sonoco), incorporated on May 10, 1899, is a manufacturer of industrial and consumer packaging products and a provider of packaging services. The Company operates in four segments: Consumer Packaging, Paper and Industrial Converted Products, Display and Packaging, and Protective Solutions.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SON – August 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $5,542,806,488 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.53 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 39.00% Pass
6. Moderate PEmg Ratio PEmg < 20 21.85 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.17 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.53 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.34 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.57
MG Growth Estimate 3.66%
MG Value $40.69
Opinion Overvalued
MG Grade B-
MG Value based on 3% Growth $37.27
MG Value based on 0% Growth $21.85
Market Implied Growth Rate 6.67%
Current Price $56.16
% of Intrinsic Value 138.02%

Sonoco Products Co is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg and PB ratios. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $2.07 in 2014 to an estimated $2.57 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 6.67% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Sonoco Products Co revealed the company was trading above its Graham Number of $35.27. The company pays a dividend of $1.54 per share, for a yield of 2.7%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 21.85, which was above the industry average of 21.21. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-12.45.

Sonoco Products Co performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$12.45
Graham Number $35.27
PEmg 21.85
Current Ratio 1.53
PB Ratio 3.17
Current Dividend $1.54
Dividend Yield 2.74%
Number of Consecutive Years of Dividend Growth 20

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Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2018
Total Current Assets $1,574,968,000
Total Current Liabilities $1,030,072,000
Long-Term Debt $1,274,325,000
Total Assets $4,622,968,000
Intangible Assets $1,638,254,000
Total Liabilities $2,832,703,000
Shares Outstanding (Diluted Average) 101,040,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.22
Dec2017 $1.74
Dec2016 $2.81
Dec2015 $2.44
Dec2014 $2.19
Dec2013 $2.03
Dec2012 $1.90
Dec2011 $2.13
Dec2010 $1.96
Dec2009 $1.50
Dec2008 $1.63
Dec2007 $2.10
Dec2006 $1.92
Dec2005 $1.61
Dec2004 $1.53
Dec2003 $1.43
Dec2002 $1.39
Dec2001 $0.96
Dec2000 $1.66
Dec1999 $1.83
Dec1998 $1.73

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.57
Dec2017 $2.24
Dec2016 $2.42
Dec2015 $2.20
Dec2014 $2.07
Dec2013 $1.97
Dec2012 $1.90
Dec2011 $1.89
Dec2010 $1.79
Dec2009 $1.72
Dec2008 $1.80
Dec2007 $1.83
Dec2006 $1.66
Dec2005 $1.48
Dec2004 $1.41
Dec2003 $1.38
Dec2002 $1.41

Recommended Reading:

Other ModernGraham posts about the company

Sonoco Products Co Valuation – Initial Coverage $SON

Other ModernGraham posts about related companies

Silgan Holdings Inc Valuation – August 2018 $SLGN
Clearwater Paper Corp Valuation – July 2018 $CLW
Intertape Polymer Group Valuation – July 2018 $TSE-ITP
Bemis Co Inc Valuation – June 2018 $BMS
Owens-Illinois Inc Valuation – June 2018 $OI
International Paper Co Valuation – June 2018 $IP
Ball Corporation Valuation – April 2018 $BLL
WestRock Co Valuation – April 2018 $WRK
Sealed Air Corp Valuation – April 2018 $SEE
Packaging Corp of America Valuation – Initial Coverage $PKG

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

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