BLL
Ball Corporation
$69.49
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Strong
·
Conviction
Overvalued
Trading 315.6% above fair value
You pay
$69.49
Bear
$12.32
Fair
$16.72
Bull
$21.12
Bear
$12.32
-82.3%
$1.76 × 7x
Fair
$16.72
-75.9%
$1.76 × 10x
Bull
$21.12
-69.6%
$1.76 × 12x
Adjust Assumptions
9.5x
1.76$
Key Value Driver
Through-cycle normalized EPS ($1.76)
Implied Market Multiple
39.5x
Summary
Using 7-year normalized EPS of $1.76 at a 10x cycle multiple, the base-case value is $16.72 per share. P/TBV cross-check: 11.0x.
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.
Recent profits ($3.30/share) are 88% above the mid-cycle average ($1.76). Buying based on peak profits is the most common mistake with boom-and-bust businesses.
Price-to-book value of 11.0x is above the normal range for this type of business (0.7x-2.0x). The stock may already price in a strong cycle.
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