O-I Glass Inc (OI, Financial) recently experienced a significant daily loss of 15.91% and a three-month loss of 15.74%. With a Loss Per Share of 1.59, investors might be questioning whether the stock is undervalued. This analysis dives deep into the financial metrics and intrinsic valuation of O-I Glass to determine if the current market price is justified.
Company Overview
O-I Glass is renowned as the world's largest manufacturer of glass bottles, with a substantial 70% of its revenue stemming from international markets. Dominant in regions such as Europe, North America, and Brazil, O-I Glass caters primarily to the beer industry, although its products also serve the wine, soda, spirits, condiments, and food sectors. The company's strategic focus is on maintaining and expanding its market leadership in these key areas. Currently, the stock's price stands at $12.58, while the GF Value suggests a fair value of $16.99, indicating that the stock may be modestly undervalued.
Understanding GF Value
The GF Value is a unique measure calculated by GuruFocus. It considers historical trading multiples like PE, PS, and PB ratios, a GuruFocus adjustment factor based on past returns and growth, and projected future business performance. According to this metric, O-I Glass (OI, Financial) appears modestly undervalued. This suggests that the stock might offer a higher future return, given its current trading price is below the estimated fair value.
Financial Strength and Stability
Investing in companies with robust financial health is crucial to avoid potential capital loss. O-I Glass's cash-to-debt ratio of 0.19, although lower than many of its peers, still positions it reasonably within the industry. GuruFocus rates its financial strength as 5 out of 10, reflecting a fair balance sheet but cautioning investors to consider the financial leverage of the company.
Profitability and Growth Prospects
O-I Glass has demonstrated profitability over the past decade, which is a positive indicator for potential investors. The company's operating margin stands at 11.44%, outperforming a significant portion of its competitors. However, its growth metrics show some challenges, with revenue growth and EBITDA growth rates lagging behind industry medians. This mixed financial performance suggests that while the company is profitable, its growth trajectory might not be as robust as some investors might hope.
Return on Invested Capital vs. Weighted Average Cost of Capital
An essential aspect of assessing a company's profitability and value creation is comparing its Return on Invested Capital (ROIC) against its Weighted Average Cost of Capital (WACC). Currently, O-I Glass's ROIC of -13.94 significantly underperforms its WACC of 2.99, indicating that the company is not generating adequate returns on its investments.
Conclusion
In summary, while O-I Glass (OI, Financial) is currently trading below its GF Value, suggesting potential undervaluation, investors should be cautious. The company's financial strength is adequate, but its profitability and growth metrics, combined with a negative ROIC compared to its WACC, suggest potential risks. Prospective investors should conduct thorough due diligence. For a deeper insight into O-I Glass's financial health and performance, consider exploring its 30-Year Financials.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
