3 Reasons to Sell BALL and 1 Stock to Buy Instead

Over the past six months, Ball’s shares (currently trading at $53.12) have posted a disappointing 9.1% loss, well below the S&P 500’s 9.9% gain. This may have investors wondering how to approach the situation.

Is there a buying opportunity in Ball, or does it present a risk to your portfolio? See what our analysts have to say in our full research report, it’s free for active Edge members.

Why Do We Think Ball Will Underperform?

Despite the more favorable entry price, we're swiping left on Ball for now. Here are three reasons there are better opportunities than BALL and a stock we'd rather own.

1. Slow Organic Growth Suggests Waning Demand In Core Business

Investors interested in Industrial Packaging companies should track organic revenue in addition to reported revenue. This metric gives visibility into Ball’s core business because it excludes one-time events such as mergers, acquisitions, and divestitures along with foreign currency fluctuations - non-fundamental factors that can manipulate the income statement.

Over the last two years, Ball’s organic revenue averaged 2% year-on-year growth. This performance was underwhelming and suggests it may need to improve its products, pricing, or go-to-market strategy, which can add an extra layer of complexity to its operations.

2. Low Gross Margin Reveals Weak Structural Profitability

At StockStory, we prefer high gross margin businesses because they indicate the company has pricing power or differentiated products, giving it a chance to generate higher operating profits.

Ball has bad unit economics for an industrials business, signaling it operates in a competitive market. As you can see below, it averaged a 21.5% gross margin over the last five years. That means Ball paid its suppliers a lot of money ($78.48 for every $100 in revenue) to run its business.

3. Breakeven Free Cash Flow Limits Reinvestment Potential

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Ball broke even from a free cash flow perspective over the last five years, giving the company limited opportunities to return capital to shareholders.

Final Judgment

Ball doesn’t pass our quality test. After the recent drawdown, the stock trades at 13.7× forward P/E (or $53.12 per share). While this valuation is fair, the upside isn’t great compared to the potential downside. There are more exciting stocks to buy at the moment. We’d recommend looking at the most dominant software business in the world.

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