BLL Investment Analysis Report & Stock Research, Ball Corp.

Ockham's Rating/Recommendation Summary

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BLL Revenue

For a long time, value investors have used the current share price relative to sales per share levels as an important valuation tool. We utilize a historical weighted average methodology that treats recent years more importantly in the calculation. When looking at BLL through this framework, we can see that our weighted average historical high and low Price to Sales per share ratios over the last 10 years are 0.87x and 0.59x respectively.

Utilizing this range we can see that BLL’s current Price to Sales per share ratio of 0.70x is somewhat below its historical weighted average by 5%. Given this level of sales per share, we suggest a neutral share price forecast. To the extent there is a further drop in the Price to Sales ratio from current levels, which would occur through some combination of increased sales per share or a decline in share price, we would only become more positive about the Price to Sales ratio outlook.

BLL Cash Earnings

Looking at BLL specifically in their Cash Earnings capabilities, Ockham views BLL as significantly below its historical average multiple of cash earnings as calculated by Ockham. Similar to our analysis of sales per share, Ockham looks at the last 10 years of cash earnings levels for BLL to identify where the current high and low price levels have been historically in relation to profit per share. Again, we utilize a weighted average methodology which relies more heavily on recent years of data. This weighted average framework provides us with an average high Price to Cash Earnings ratio per share of 11.21 and a 7.42 low over the same period.

So with BLL's current price (latest close of $54.45) and most recent level of Cash Earnings reported, we see significant opportunity from a value perspective. At its current price level, BLL is 19% below its average level of Price to Cash Earnings on a historical basis. This means that investors were willing to pay for a much higher stock price than currently for the same level of Cash in the past, on a relative basis. There are a couple of important things to remember, however. First, value doesn't exist in a vacuum. So if the market doesn't recognize this value, even a great disparity in Price to Cash Earnings cannot force an immediate stock price reaction. Second, patience is key when looking at securities that have reached these levels of Price to Cash Earnings versus their historical norms. So be patient with BLL.

BLL Dividends

A positive Ockham rating does not require a company to pay out an inviting dividend or a dividend at all. However, we believe dividends provide a useful measure of a company's inherent expectations.

Comparable to our analysis of Sales and Cash Earnings per share, we examine dividend yields from BLL against the historic high and low levels over an available data range. Because BLL has an established history of paying a dividend to shareholders, there is value in comparing recent dividends to historical dividends. In BLL’s case, the estimated annual dividend is $0.40 producing a current dividend yield of 0.73%. The highest dividend yield from BLL in recent history was 1.58% while the lowest dividend yield was 0.66%. It is never a good sign for a company to pay significantly lower dividends, in this case 34.82% below the median yield. Although, dividends are a relatively small portion of our analysis framework, we still see this as a negative factor.