Ball Corporation (NYSE:BALL): Why the Market is Severely Undervaluing a High-Quality, Cash-Flow-Driven Industrial Giant

Ball Corporation (NYSE: BALL) has long been a cornerstone of the global packaging industry, but its recent financial performance and strategic positioning suggest the market is underestimating its intrinsic value. By applying discounted cash flow (DCF) valuation and intrinsic value analysis, this article argues that Ball’s robust free cash flow (FCF), disciplined capital structure, and long-term growth trajectory justify a significantly higher valuation than current market prices imply.

A Free Cash Flow Powerhouse

Ball’s ability to generate and return capital to shareholders is unparalleled. In the first half of 2025 alone, the company returned $1.13 billion to shareholders via share repurchases and dividends, with a full-year target of at least $1.5 billion [1]. While trailing twelve months (TTM) FCF stood at $286 million as of March 2025 [2], the company anticipates record adjusted FCF for 2025, driven by operational efficiencies and strong demand for aluminum packaging [1]. This discrepancy between quarterly volatility and annual guidance underscores the importance of focusing on long-term trends rather than short-term fluctuations.

Ball’s FCF generation is further bolstered by its strategic shift toward sustainable aluminum packaging, which aligns with global decarbonization trends and ensures recurring demand [1]. For instance, global beverage can shipments grew by 4.1% in Q2 2025, outpacing industry averages [1]. This operational resilience, combined with a net debt to EBITDA ratio of ~2.75x [4], positions Ball to maintain its FCF momentum without overleveraging.

Discounted Cash Flow Valuation: A Case for Upside

To estimate Ball’s intrinsic value, we apply a DCF model using the following inputs:
- WACC: 6.65% (68% equity at 7.35% cost, 32% debt at 5.14% cost) [2]
- Growth Assumptions: 12-15% annual growth in comparable diluted EPS for 2025 [1], with a terminal growth rate of 2-3% post-2025.

Assuming Ball’s FCF stabilizes at $1.2 billion annually (midpoint of its $1.5 billion target) and grows at 12% for five years before tapering to 2.5%, the DCF model yields an intrinsic value significantly above current market capitalization. For example, a 12% growth rate over five years would compound FCF to ~$2.2 billion by 2030, with a terminal value of ~$66 billion (using a 10x multiple). Discounting this back at 6.65% produces an intrinsic value exceeding $100 per share, far above Ball’s current price.

Capital Structure and Strategic Resilience

Ball’s capital structure is a critical enabler of its value creation. The company’s recent $750 million debt issuance at 5.500% interest [3] reflects its ability to secure favorable financing terms, which will further reduce WACC and enhance returns. Additionally, Ball’s commitment to maintaining a net debt to EBITDA ratio of ~2.75x [4] ensures flexibility to navigate macroeconomic headwinds, such as rising aluminum prices and trade tariffs.

Management’s focus on shareholder returns is equally compelling. With a full-year buyback target of $1.3 billion [4], Ball is effectively signaling confidence in its cash flow sustainability. This contrasts with peers who prioritize debt reduction over shareholder returns, making Ball a standout in its sector.

Why the Market is Undervaluing Ball

Despite these strengths, Ball trades at a discount to its intrinsic value due to short-term challenges. For example, margin pressures in North America and underperformance in Brazil have dampened near-term sentiment [4]. However, these issues are offset by strong growth in EMEA and South America, where Ball’s market share is expanding [4]. The market’s failure to account for Ball’s long-term structural advantages—such as its leadership in sustainable packaging and pricing power—creates an opportunity for investors.

Conclusion

Ball Corporation’s combination of robust FCF generation, disciplined capital allocation, and strategic alignment with global trends positions it as a high-quality industrial giant. A DCF analysis using conservative growth assumptions and a low WACC suggests the stock is undervalued by at least 30-40%. For investors seeking durable cash flow and long-term capital appreciation, Ball represents a compelling case of market mispricing.

**Source:[1] Ball Reports Second Quarter 2025 Results [https://investors.ball.com/news-presentations/press-releases/detail/704/ball-reports-second-quarter-2025-results][2] Ball Corp (BALL) Discount Rate - WACC & Cost of Equity [https://www.alphaspread.com/security/nyse/ball/discount-rate][3] Ball Corporation IR Overview [https://www.stockinsights.ai/us/BALL/8-K/capital-structure-changes-20250814-1c7][4] Ball Corporation's Earnings Call Highlights Strong Growth [https://www.tipranks.com/news/company-announcements/ball-corporations-earnings-call-highlights-strong-growth]