BALL
Ball Corporation
$56.51
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Strong
·
Conviction
Overvalued
Trading 85.4% above fair value
You pay
$56.51
Bear
$18.75
Fair
$30.48
Bull
$42.20
Bear
$18.75
-66.8%
$2.65 × 7x + net cash
Fair
$30.48
-46.1%
$2.65 × 10x + net cash
Bull
$42.20
-25.3%
$2.65 × 12x + net cash
Key Value Driver
Through-cycle normalized EPS ($2.65)
Implied Market Multiple
21.3x
Summary
Our base-case estimate uses Normalized Earnings × Cycle Multiple. We then blend that result with the average analyst price target of $70.25 from 23 analysts, using a 25% weight on analyst consensus. That produces an estimated intrinsic value of $30.48 per share.
Warnings
This company has a built-in lending arm whose debt is mixed in with the main business. We capped the debt adjustment to avoid overstating what the core business owes.
Price-to-book value of 250.8x is above the normal range for this type of business (0.7x-2.0x). The stock may already price in a strong cycle.
Wall Street's average price target is $70.25 (from 23 analysts). Our estimate is 75% below the consensus -- consider that gap carefully.
Key Risks
- Standard 10-year DCF produces unreliable terminal values for cyclicals
- 'Cheap' P/E at cycle peak is the most common value trap — normalize first
- Captive finance subsidiaries have different risk profiles from manufacturing