Does Silgan Holdings Offer Value After Supply Chain Innovation and a 22% Share Price Drop?

• Wondering if Silgan Holdings could be a hidden gem, or if the market has already priced it to perfection? Let's break down the numbers and see whether there's untapped value here.
• The stock has experienced some ups and downs lately, including a slight dip of 0.2% this week and a 3.6% rise over the past month. However, it remains down 22.4% year-to-date.
• Recent news about industry supply chain innovations and Silgan's strategic acquisitions has caught investors' attention, fueling debate on whether these efforts could lead to a turnaround. Analysts are also monitoring regulatory shifts in packaging standards, which may impact the company's competitiveness.
• Silgan Holdings currently scores 6 out of 6 on our valuation checks, the highest rating by our metrics. The different valuation approaches will be discussed shortly, and a fresh perspective for evaluating fair value beyond traditional methods will be presented later on.

Find out why Silgan Holdings's -30.0% return over the last year is lagging behind its peers.

Approach 1: Silgan Holdings Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow (DCF) model projects a company's future free cash flows and then discounts those back to today's dollars to estimate the business's intrinsic value. This approach helps investors determine if a stock is attractively priced based on its expected financial performance rather than just its current market sentiment.

Silgan Holdings' latest reported Free Cash Flow (FCF) stands at $98.5 million. Analyst estimates see this figure rising significantly over the coming years, with projections reaching $426.6 million by 2026 and $460.9 million by 2027. Beyond the analyst projection window, Simply Wall St extrapolates growth out to 2035, with year-ten FCF expected at $646.2 million. All numbers are presented in US dollars.

Using the 2 Stage Free Cash Flow to Equity model, the DCF analysis calculates an intrinsic value of $85.94 per share for Silgan Holdings. This is notably higher than the current market value, implying the stock is trading at a 53.9% discount to its fair value.

Based on this comprehensive cash flow analysis, Silgan Holdings appears solidly undervalued and may offer investors potential upside if projected cash flows are realized.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Silgan Holdings is undervalued by 53.9%. Track this in your watchlist or portfolio, or discover 920 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Silgan Holdings.

Approach 2: Silgan Holdings Price vs Earnings

For profitable companies like Silgan Holdings, the Price-to-Earnings (PE) ratio is a widely used measure of valuation. It relates a company's market price to its earnings, making it easy to compare both against historical levels and peers. The PE ratio is especially useful here, as it quickly puts earnings into perspective relative to what investors are willing to pay for them.

When evaluating what a "normal" or "fair" PE ratio should be, investors should consider both expected earnings growth and the risk profile of the business. Higher growth expectations or lower risk typically justify a higher PE, while companies facing uncertainty command lower multiples. As of now, Silgan Holdings trades at a PE of 13.3x, notably lower than the Packaging industry average of 15.8x and the peer group average of 59.6x.

Simply Wall St's proprietary "Fair Ratio" provides more context by accounting for company-specific factors such as earnings growth prospects, risk, profit margin, industry dynamics, and market cap, rather than relying solely on generic industry or peer benchmarks. For Silgan Holdings, the Fair Ratio stands at 17.6x, suggesting that a reasonable valuation would be above the current market multiple. Because the PE is below what our Fair Ratio suggests, the stock looks undervalued using this methodology as well.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1443 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Silgan Holdings Narrative

Earlier we mentioned that there is an even better way to understand valuation. Let's introduce you to Narratives. A Narrative on Simply Wall St is your personal story or perspective on a company, captured directly in your own fair value estimate and forecasts for revenue, earnings, and margins. Instead of just relying on market sentiment or generic analyst numbers, Narratives let you tie Silgan Holdings' real-world events and strategies to your financial outlook, creating a bridge between what you believe about the company's future and what you think it is worth today.

Narratives are designed to be intuitive and accessible. They are available on the Simply Wall St Community page, where millions of investors share and compare their views. By using a Narrative, you can see exactly how your assumptions stack up against the current share price and decide for yourself if it is time to buy, hold, or sell. Narratives are especially powerful because they update dynamically and automatically reflect new information such as earnings releases or major news.

For example, one Narrator may set a bullish price target of $67 for Silgan Holdings, forecasting rapid margin expansion from premium packaging and strong pet care growth. Another might take a more cautious stance with a $47 estimate, citing risks from industry headwinds and shifting consumer preferences.

Do you think there's more to the story for Silgan Holdings? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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