Ball has been treading water for the past six months, recording a small loss of 3.6% while holding steady at $48.96. The stock also fell short of the S&P 500’s 15.5% gain during that period.
Is there a buying opportunity in Ball, or does it present a risk to your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.
Why Do We Think Ball Will Underperform?
We're cautious about Ball. Here are three reasons we avoid BALL and a stock we'd rather own.
1. Core Business Falling Behind as Demand Plateaus
We can better understand Industrial Packaging companies by analyzing their organic 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 failed to grow its organic revenue. This performance was underwhelming and implies it may need to improve its products, pricing, or go-to-market strategy. It also suggests Ball might have to lean into acquisitions to accelerate growth, which isn’t ideal because M&A can be expensive and risky (integrations often disrupt focus). 
2. Low Gross Margin Reveals Weak Structural Profitability
Gross profit margin is a critical metric to track because it sheds light on its pricing power, complexity of products, and ability to procure raw materials, equipment, and labor.
Ball has bad unit economics for an industrials business, signaling it operates in a competitive market. As you can see below, it averaged a 21.6% gross margin over the last five years. Said differently, Ball had to pay a chunky $78.42 to its suppliers for every $100 in revenue. 
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
We cheer for all companies making their customers lives easier, but in the case of Ball, we’ll be cheering from the sidelines. With its shares trailing the market in recent months, the stock trades at 12.9× forward P/E (or $48.96 per share). This valuation is reasonable, but the company’s shaky fundamentals present too much downside risk. There are better stocks to buy right now. Let us point you toward one of Charlie Munger’s all-time favorite businesses.
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