Ball Corp.’s PE At 10-Year Low: A High-Quality Company on Sale

There’s something to be said for buying a stock based solely on the company’s great track record. If management finds ways to make that share price rise year after year after year, the details of how they do it each time get less and less important. And if such a company hits a growth streak but keeps a reasonable share price – well, that’s when we have something really interesting to consider.

This is where we now find Ball Corp. (BLL), a $6 billion, 131-year-old company that makes Coke (KO) cans. The company used to make those Cracker Barrel-ish glass canning jars, but it got out of glass and plastic years ago to focus on drink cans, food tins (like aluminum take-out boxes) and other metal containers. Coke is just one of hundreds of customers, including the U.S. government for aerospace parts.

In the past decade, Ball’s share price has never taken a downward turn that lasted more than about eight months. Even during the recession, these shares tended to outperform the index considerably. The share price has doubled in the past five years; rose about 50% over the past two.

Ball Corporation Price Stock Chart

Ball Corporation Price Stock Chart by YCharts

Ball shares were trading at 52-week high levels recently until they got swept up in the unpleasantness that took down the entire market. They’re now trading at about 11.6 times Ball earnings, a PE that makes them cheaper than they’ve been in 10 years. YCharts Pro gives the company good marks for fundamentals and share valuation.

After suffering through the recession with everyone else, Ball’s sales have taken off in every direction. At last quarterly report, all divisions were growing, despite the fact that there wasn’t much new business in its core North American can business. There were particularly big sales gains in China and Europe, as well as its aerospace group.

Ball Corporation Revenues (TTM) Stock Chart

Ball Corporation Revenues (TTM) Stock Chart by YCharts

Profits haven’t had any trouble keeping up.

Ball Corporation Net Income (TTM) Stock Chart

Ball Corporation Net Income (TTM) Stock Chart by YCharts

Ball doesn’t name-drop clients, but its fine financial performance of late was surely helped by the good fortunes of some of its best customers. Both Coca-Cola and PepsiCo (PEP) have had their own growth spurts in the last couple of years.

The Coca-Cola Company Revenues (TTM) Stock Chart

The Coca-Cola Company Revenues (TTM) Stock Chart by YCharts

Ball is expected to widen its profit margins with acquisitions, such as a European aerosol can maker in Europe it recently bought. It reports having about $400 million in full-year free cash flow to go after them. But really, its operations already have upped immensely the amount of cash generated per sale.

Ball Corporation Operating Margin (TTM) Stock Chart

Ball Corporation Operating Margin (TTM) Stock Chart by YCharts

The company pays a pitiful dividend – it’s yielding less than 1% -- but it apparently hasn’t needed a bigger one to keep investors happy. Berkshire Hathaway's (BRK.A)Warren Buffet is big on buying companies with great management and holding them for a lifetime. That’s why he’s owned Coca-Cola shares for years. For today’s investors, Ball may be a good Coke substitute.

Dee Gill is an editor for the YCharts Pro Investor Service which includes professional stock charts, stock ratings and portfolio strategies.

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