A Financial analysis of Silgan Holdings Inc

PEPSICO - A Financial analysis of Silgan Holdings Inc

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Diversification needs to be the premier term utilized when creating a portfolio. There is always strong temptation to find recognizable companies in customary industries to seek profits. However, many possible portfolio-boosters are not in these ubiquitous corporations, but in more underground industries like packaging and packaging. Although this business only contains 14 companies over a market capitalization of one billion dollars, this business also supports companies with huge increase possible and undersold valuations. One particular company, Silgan Holdings (Slgn), not only has a strong firm model, but utilizes such a plan to supply shareholders with the financial drive and possible investors look for when diversifying portfolios.

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Before finding too deep into Silgan's financial strength, it is leading to peruse the firm model in relation to generation of revenue. Agreeing to Reuters, Silgan "is a maker of metal and plastic buyer goods packaging products." More specifically Silgan separates its firm into three definite sections: Metal Food packaging (61% of revenue), Plastic packaging (22% of revenue), and Closures (17% of revenue). While it was mentioned in the introduction that Silgan did not create products recognizable by brand to the midpoint consumer, in an inconspicuous manner, the firm provides products used quite frequently. For example, the Metal Food package region is "engaged in the form and sale of steel and aluminum containers." These products are shaped to store buyer products such as soup, fruit, meat, coffee, and pet food among others. The last step is to then get these products sent to companies along with general Mills, Campbell, and Del Monte. The Plastic packaging firm plan follows a similar structure, contribution "custom designed and stock Hdpe packaging for personal care and healthcare products, along with packaging for shampoos, conditioners, hand creams, lotions, cosmetics and toiletries." After these products are engendered, procurement comes from similar buyer manufacturers along with Unilever, Procter & Gamble and Kraft. The last section of business, Closures, is instructed to "manufacture metal, composite and plastic vacuum closures for food and beverage products." Silgan's consumers for this firm consist of many of the aforementioned companies as well as other non-cyclical businesses such as Heinz, PepsiCo, and Coca-Cola. Therefore, while many investors may desire to invest in the more recognizable companies mentioned in this paragraph, without Silgan's services, there is no formidable firm for these other corporations.

However, in order for these services to be adequately distributed, there needs to be some ask evident. Fortunately for Silgan, over the past year, buyer products have, as a group, appreciated in share price by over three percent. While some investors may ask the thinking for appreciating such a low movement to the upside, it is leading to know that the goods these companies supply are both inelastic and non-cyclical. companies like Coca-Cola and general Mills will continue to sell goods all the time, regardless of price, at similar qualities. Moreover, while times of economic uncertainly, or slow economic increase (such as what is currently occurring) companies in the non-cyclical business will attract more investors in a "flight to quality" movement, keeping share prices high for this industry. By process of deduction, if ask for Pepsi and Campbell's soup remains strong, Silgan will continue to justify strong earnings, a low P/E ratio, and further share price appreciation. This form is convincingly evident, as Silgan has grown over 40% in share price the past year, escalated 22% in 2006, and has not had a down calendar year since 2000. This evidence supplied signifies a strong firm plan--one that shall continue to make Silgan a strong firm to commit capital too.

Nevertheless, while this firm plan looks excellent, there are 25 other publicly-traded companies in this business which may offer similar or good services. What separates Silgan? The write back is the strong fundamentals the firm continuously reveals. Over the past twelve months Silgan has reported income at 2.67 billion dollars. This estimate competes quite nicely with industry-market cap competitors: Greif, AptarGroup, and packaging Corporation of America. Any way the differences come in with regard to margins. Gross margins for Silgan were reported at 14.65% and operating margins at 9.01% as a trailing figure, Agreeing to Reuters. Comparing these two numbers to five year averages of respective 12.80% and 7.79%, there is a fairly significant gain. While these numbers are little below the business trailing midpoint of 22.54% and 7.50%, the discrepancy is that the business as a whole saw gross margins decrease from its respective five year average, while Silgan's respective estimate grew by 14.5%. Comparing this estimate to market-cap competitors of the industry, Greif only saw a 3.67% increase in gross margins and AptarGroup authentically saw a -3.08% decrease for the same time with regard to gross margins.

What is also strong about Silgan is that sales increase rose 6.57% as a five year midpoint to 11.11% in the past year. This estimate is not only above the business midpoint at 8.01%, but is above the five year midpoint when the industry's respective figures are not. This increase of 69.10% is greater than the 62.93% increase AptarGroup saw and also above the acceptable estimate of 11.01% packaging Corp saw in the past twelve months. Eps increase over the past twelve months also grew roughly 100%--above business average, and good than competitors such as Grief which realized a negative Eps midpoint last year. Moreover, capital spending as a five year increase rate of 5.51% for Silgan, while below the business midpoint at 7.06%, is much good compared to market-cap competitors, as the next best Capex spender was AptarGroup which only spent at a rate of 3.14% for the same time period. High spending on equipment and other restructuring products will only be useful in the future for Silgan, because not only will the firm see economies of scale from added assets, but more cash to use later for investing purposes such as stock buybacks and dividend payouts. This is excluding the fact that Silgan has a trailing operating cash flow of near 400 million dollars--a estimate greater than both Greif and AptarGroup. Therefore, through the evidence given above, there is strong evidence that Silgan has matured quite nicely financially and should continue to do so in the future.

With respect to growth, what also makes Silgan fascinating is the undervalued status many investors may appraise this stock. Agreeing to Reuters, Silgan has a forward P/E ratio of 15.06. Not only is this complicated lower than the trailing figure, but significantly lower than the business complicated of 25.26 as well. Comparing this form to other business competitors, Greif (16.39), AptarGroup (19.11), and packaging Corp (15.55) all have forward multiples greater than Silgan's. In addition, Silgan's share price also is low compared to sales, as a forward price to sales evaluation of 0.66 is quite lower than the three aforementioned companies (Greif (0.72), AptarGroup (1.40), and packaging Corp (1.15)). Because sales and income are quite high compared to the price, there is ample evidence that investors have not purchased shares rationally for Silgan, given the respective numbers for the three other companies. There is a significant chance to make capital gains now from these values.
Examining more intangible factors, the Ceo of Silgan, Anthony J. Allot, and his 8600 employees have been using shareholder equity quite nicely. With higher net profit results, Roe has grown to 34.80% and Roi has been reported as 7.26% in the past twelve trailing months. Roe is greatly above the business midpoint at 21.29% and also above each of the three respective aforementioned company's figures. A most recent quarter current ratio of 2.72 is significantly above the business midpoint at 1.49 and higher-than-average interest coverage ratio of 3.83 allows Silgan to carry more debt. Silgan also has a high asset (1.30) and receivable (9.12) turnover ratio--making the firm more efficient. All of these factors coupled with high increase and an oversold make Silgan very lucrative to the investor.

Overall there are many factors which make Silgan a great firm to invest in. Also the aforementioned attributes, Silgan also has a dividend yield of 1.28%--a great asset to consist of while times of economic uncertainty. Technically speaking, while Silgan dropped past its simple fascinating averages a few weeks ago and has dropped in share price a bit, now may be a great time to buy shares. Parabolic Sar is now above the share price, stochastic and Rsi indicators are very low--signaling an over sold price, and the Macd indicator also illustrates its two lines ready to converge. Therefore, along with the technical analysis, the underlying and firm plan Silgan provides is exquisite for any investor and is a firm worth finding into.

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