How Do We Tell if Crown (CCK) Is Overvalued?

Crown may be overvalued with poor growth indicators, but the 16 analysts following the company give it an average rating of buy. The analysts have set target prices ranging from $71 to $106 per share, for an average of $95. At today's price of $87.77, Crown is trading -7.61% away from its average target price, suggesting there is an analyst consensus of some upside potential.

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. Based in Yardley, PA, the large-cap Consumer Cyclical company has 26,000 full time employees. Crown has offered a 1.0% dividend yield over the last 12 months.

Crown does not have a meaningful trailing P/E ratio since its earnings per share are currently in the red. Based on its EPS guidance of 6.84, the company has a forward P/E ratio of 12.8. In comparison, the average P/E ratio for the Consumer Cyclical sector is 24.11. Furthermore, Crown is likely overvalued compared to its book value, since its P/B ratio of 6.3 is higher than the sector average of 3.11.

If analysts are giving the the company a decent rating despite its hefty price point, it could be related to its strong cash flows. Furthermore, Crown has wide margins as you can see in the financial summary below. However, its net debt to EBITDA ratio indicates unsustainable use of leverage.

2019-12-31 2020-12-31 2021-12-31
Revenue (MM) $11,665 $11,575 $11,394
Revenue Growth n/a -0.77% -1.56%
Gross Margins 19.8% 20.7% 20.8%
Gross Margins Growth n/a 4.55% 0.48%
Operating Margins 10.2% 11.2% 11.7%
Operating Margins Growth n/a 9.8% 4.46%
Earnings Per Share $3.78 $4.3 -$4.3
EPS Growth n/a 13.76% -200.0%
Free Cash Flow (MM) $731 $728 $89
FCF Growth n/a -0.41% -87.77%
Capital Expenditures (MM) -$432 -$587 -$816
Net Debt / EBITDA 4.38 4.07 19.77
The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.