Stock Analysis

Is Now The Time To Put Crown Holdings (NYSE:CCK) On Your Watchlist?

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NYSE:CCK
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For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it completely lacks a track record of revenue and profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

In contrast to all that, I prefer to spend time on companies like Crown Holdings (NYSE:CCK), which has not only revenues, but also profits. Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

Check out our latest analysis for Crown Holdings

How Fast Is Crown Holdings Growing?

The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. It certainly is nice to see that Crown Holdings has managed to grow EPS by 22% per year over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. Crown Holdings reported flat revenue and EBIT margins over the last year. That's not a major concern but nor does it point to the long term growth we like to see.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

earnings-and-revenue-history
NYSE:CCK Earnings and Revenue History March 30th 2021

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Crown Holdings's future profits.

Are Crown Holdings Insiders Aligned With All Shareholders?

Since Crown Holdings has a market capitalization of US$13b, we wouldn't expect insiders to hold a large percentage of shares. But we do take comfort from the fact that they are investors in the company. Notably, they have an enormous stake in the company, worth US$256m. This suggests to me that leadership will be very mindful of shareholders' interests when making decisions!

Is Crown Holdings Worth Keeping An Eye On?

For growth investors like me, Crown Holdings's raw rate of earnings growth is a beacon in the night. I think that EPS growth is something to boast of, and it doesn't surprise me that insiders are holding on to a considerable chunk of shares. Fast growth and confident insiders should be enough to warrant further research. So the answer is that I do think this is a good stock to follow along with. You still need to take note of risks, for example - Crown Holdings has 1 warning sign we think you should be aware of.

Although Crown Holdings certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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What are the risks and opportunities for Crown Holdings?

Crown Holdings, Inc. designs, manufactures, and sells packaging products and equipment for consumer goods and industrial products in the Americas, Europe, and the Asia Pacific.

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Rewards

  • Trading at 56.9% below our estimate of its fair value

  • Earnings are forecast to grow 17.18% per year

Risks

  • Debt is not well covered by operating cash flow

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