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


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.

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