About Ball Corporation

I can’t lie, I like the Denver Nuggets.

With two-time NBA league MVP Nikola Jokic and head coach Michael Malone at the helm, Jamal Murray and Michael Porter Jr. back in the mix, Denver’s future is looking pretty good.

If you’ve read our previous articles, you’ve probably gathered that one of MacroHint’s founding partners is basketball crazed. While we’d love to talk about basketball for hours on end and use this platform to do just that, we’re a lot more interested in finance and if you’re reading this, you probably are too.

So why in the world did we bring up the Denver Nuggets if this article’s main topic of discussion is going to be revolving around Ball Corporation? 

We’re glad you asked!

The company itself is headquartered in Broomfield, Colorado and of course, the Nuggets play their home games at the Ball Arena which is located in Denver.

Although the company has a large business footprint and strong community ties in and around Colorado, this seemingly mundane, ordinary company has a gigantic global presence.

After all, Ball is the world’s largest beverage can manufacturer (sometimes falls in second place to Crown Holdings). The company reportedly has secured long-term contracts with companies such as Coca-Cola, PepsiCo, Molson Coors and Heineken.

From glass jelly jars to cans of your favorite soda from the neighborhood corner store, it wouldn’t be that difficult to investigate and find a tinily printed Ball logo on the jar or can that you’re all of the sudden strangely investigating.

Aside from one of our partner’s affinity for the Nuggets, legend has it that the same partner has also found the Ball logo on a soda can when he was looking to see who manufactured the cans while at his neighborhood convenience store.

Did we mention that you can find inspiration in strange places?

We should also note that the company also has an aerospace division in which it focuses on airframes, instruments and other integral pieces of equipment that are used in manufacturing aircraft and spacecraft.

Ball has worked with major aerospace and defense manufacturer Boeing as well as the United States Air Force on projects that have been on the leading edge of innovation in aviation.

This company is quite unique to say the least and seemingly has a lot going on.

A consideration for Ball Corporation

Although we’ve frequently discussed companies and potential strategic acquisitions, after some initial research on Ball we think it might make sense for the company’s executive team to consider splitting the company into two.

While it may initially sound like a weighty and outlandish venture, a few companies in recent history such as Johnson & Johnson, NCR and Kellogg’s have recently announced their intentions of segmenting off different businesses into their own individual entities.

It’s usually viewed just as a way for the company to refocus and attain as much productivity and long-term efficiency as possible through the refocusing process.

It could also be pursued in search of a more favorable and optimal tax strategy.

Regardless of the reason, we think it wouldn’t be a bad idea for Ball to strongly consider (if they haven’t already) breaking the company into two entities, beverages (specifically, packaging) and aerospace.

We just think these two business segments are too different from each other and it might serve the company well if divvied up its operations and corporate structure.

Considerations aside, now that we’ve established a better picture of what Ball does and the businesses it’s involved in, let’s break down the company’s core financials and see whether or not the company’s stock is worth considering investing in for the long haul.

Ball’s stock financials

Ball currently has a market capitalization of $15.52 billion, a price-to-earnings (P/E) ratio of 22.16 and pays out an annual dividend of $0.80.

We’d also like to note that the company’s stock is down nearly 44% in the past year’s span of time (since October 2021) which has likely driven its valuation down, making the company’s stock more affordable and closer to trading at fair value or what it’s worth, according to its current P/E ratio.

This is a scenario in which we think investors (including ourselves) must not be automatically lured into the temptation of blindly investing in a quality company’s stock just because its price has nearly been cut in half.

While this can definitely present an opportunity, it is imperative that we investigate further to see if one man’s investment in Ball Corp.’s stock is another man’s treasure.

No, we’re not implying that Ball stock is trash, but come on, we’re serious about how we invest and we think you should be too.

According to the company’s balance sheet, Ball’s executive team manages around $19.7 billion in total assets along with approximately $16 billion in total liabilities.

From our perspective, the company’s total liabilities seem a bit high as it has crept up over the last five years. For instance, Ball’s total liabilities in 2017 stood at just north of $13.2 billion and has since risen to the aforementioned $16 billion. 

This probably has a lot to do with something that is generally out of Ball’s hands, commodity price fluctuations.

Ball and the price of aluminum

Namely, of course, aluminum.

This is just a slightly somber reality of this company’s business in that it has to constantly monitor and attempt to hedge against large swings or just general increases in the price of the metals it uses and manufactures across the globe. Given that this is the case, the fact of the matter is the price of aluminum has risen substantially in recent history.

We can’t imagine the sort of damage this has done to Ball’s profit margins.

Although the price of aluminum isn’t always unbearably expensive, the issue is that this will always be and have to be a concern for Ball. Our team thinks that the company’s stock is likely to continue seeing steady declines in the short run as geopolitical volatility and war-related concerns (specifically regarding Russia and Ukraine) continue to mount, pushing prices of many core commodities up across the board. 

Thankfully, as we mentioned before the company has locked in some very solid long-term contracts which solidifies the company as the market leader it is today while likely offsetting some of these commodity price impacts, however if one were to invest in Ball’s stock, you must fully understand that ultimately Ball is a business that is heavily impacted (to the downside and upside) by prices it cannot control and even the slightest rumors or concerns can cost the company a lot of jars.

Ball’s stock financials continued

From a revenue standpoint, we were pretty much on the ball with this one.

Oh, come on, that was funny.

Cringey jokes aside, Ball’s revenue has been quite consistent, ranging between $10.9 billion and $13.8 billion over the last five years which isn’t surprising to say the least given the long-term nature of their contracts.

The company has also been able to produce positive net income according to its cash flow statement over the last five years which certainly wasn’t easy to do given the various macroeconomic headwinds it faced previously and is currently trudging through.

Consistency in these regards has been this company’s strong suit.

Ball’s stock fundamentals

Our original projections were incorrect as it relates to the company’s trailing twelve month (TTM) net profit margin.

Not in a good way.

As we initially expected Ball’s TTM net profit margin to be slightly higher if not notably higher than that of the industry average given its leadership position in the industry, the company actually trails the industry average by a little more than 1% which isn’t a major difference but is a difference that we didn’t expect nonetheless.

We do hope to see Ball’s net profit margin exceed that of the industry average in the next few years and while it’s not necessarily make or break for our overall opinion on the company’s stock, it’s definitely a factor and we think expectations, especially from a profit standpoint should be high for any major publicly traded company, including Ball.

As it relates to the company’s core return metrics, its TTM returns on equity, assets and investment are all lower than that of the industry average as well.

We would’ve hoped that the company’s returns would have at least met the industry average, however this just simply isn’t the case.

Should you buy Ball stock?

Even though most companies, small or large, private or public are impacted by fluctuations in commodity prices, Ball is especially sensitive.

Along with the company’s relatively low TTM net profit margin and lackluster core returns along with the indefinite headwinds it is likely to face moving forward given the current geopolitical volatility, we give the company’s stock a “sell” rating.

DISCLAIMER: This analysis of the aforementioned stock security is in no way to be construed, understood, or seen as formal, professional, or any other form of investment advice. We are simply expressing our opinions regarding a publicly traded entity.