Stock Analysis

When Should You Buy Crown Holdings, Inc. (NYSE:CCK)?

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NYSE:CCK
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Today we're going to take a look at the well-established Crown Holdings, Inc. (NYSE:CCK). The company's stock saw significant share price movement during recent months on the NYSE, rising to highs of US$112 and falling to the lows of US$97.29. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Crown Holdings' current trading price of US$101 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Crown Holdings’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Crown Holdings

What's the opportunity in Crown Holdings?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 17.79x is currently trading slightly below its industry peers’ ratio of 20.52x, which means if you buy Crown Holdings today, you’d be paying a decent price for it. And if you believe Crown Holdings should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. Although, there may be an opportunity to buy in the future. This is because Crown Holdings’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What kind of growth will Crown Holdings generate?

earnings-and-revenue-growth
NYSE:CCK Earnings and Revenue Growth October 1st 2021

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. With profit expected to grow by a double-digit 20% over the next couple of years, the outlook is positive for Crown Holdings. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? CCK’s optimistic future growth appears to have been factored into the current share price, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at CCK? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on CCK, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for CCK, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. At Simply Wall St, we found 2 warning signs for Crown Holdings and we think they deserve your attention.

If you are no longer interested in Crown Holdings, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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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