Silgan Holdings Inc. - A Speculative Analysis (NYSE: SLGN)

Introduction: Welcome back to my weekly stock analysis. Disclaimer: I am not invested in this one. Silgan Holdings Inc. (NYSE: SLGN) Sector: Packaging (Industry) Company Strengths & Risks: Silgan is a leading supplier of rigid packaging for consumer goods. Silgan has 109 manufacturing facilities across 4 listed continents. They also claim to be the leading supplier of metal containers in North America and Europe for food and general line items. SLGN is based in Connecticut and is fairly recent (founded in 1987) and faced debt issues in the early 1990s and 2000s. The company seems to have shaped up. Strengths: - Current leading supplier of packaging with continental diversity - Great PE ratio - Great dividend growth rates - Low payout ratio - Paid increasing dividend since 2004* Risks: - Low yield - Many competitors in the packaging sector - Low projected current returns Financial History and numbers SLGN: Numbers from Seeking Alpha as of Feb 14, 2022 Numbers from Macro Trends as of Feb 14, 2022 Stock SLGN P/E Ratio 11.03 Stock price $42.46 Current Annual Payout/Share $0.56 Yield 1.32% 5 Yr Div Growth Rate 10.49% 3 Yr Div Growth Rate 11.87% 1 Yr Div Growth Rate 16.67% Years Of Growth 4 Current Payout Ratio 16.42% Free Cash Flow / Share 0.9176 Revenue (ttm) 5.465B Debt / Equity Ratio 2.191 Debt / EBITDA 4.005 EPS 3.85 ROI 7.70% ROA 5.00% These numbers suggest to me a company shaping up but not exactly all there. The company seems committed to raising the dividend and keep plugging along. The issue is that the debt is absurdly high (possibly due to the numerous acquisitions, including a hand in CPB in 1998). SLGN does not have a good projected return but this may be due to debt ratios. That said, the payout ratio and PE ratio look enticing. I will now use the 3 year dividend growth rate to project further. Year SLGN 2022 0.63 2023 0.70 2024 0.78 2025 0.88 For another way, let's use historical payout ratio to project out. YEAR SLGN EPS estimate 2021 3.85 EPS estimate 2022 4.09 2021 dividend 0.63 2022 dividend 0.67 Final Thoughts: I have to be honest before I go into my usual conclusion. I do not like that SLGN seems to be acquiring so much without the ebitda to match. With the current trend, I don't expect a change from the horizontal trading we have seen thus far. If they ever stop the acquisition train, maybe they can break out above 44 again. If I am allowed to use past actions, SLGN seems to want to drop the debt to equity ratio to about 1.5-1.8 before raising debt again. The fact that they're approaching 2 again means it might be time for another acquisition. This is a huge point of concern for me. More debt on top of a 4.01 debt to ebitda ratio may mean that their acquisitions or partnerships have not been optimal. I can't imagine how long they’ll keep the leading manufacturer status, but I do not know if I like the direction of the company fully. Also to address the 4 year dividend growth dip. This coincided with a 2 for 1 stock split, so I am willing to be a bit lenient there. SLGN raised the dividend back to the normal level and has grown ever since. Thus, if I had to be less biased, I would be willing to give the full 18 year dividend growth mark. I leave it up to the reader if another event was linked to this dividend drop. This all being said- I expect SLGN to keep doing its thing and raising the dividend. Whether or not the company is worth 43$ is another story. Weekly price estimate for a future date, via consulting the crystal ball: Predicted price for SLGN for Jun 20, 2022: $42.85. There is no factual basis that I will give. I hope someone out there found this post interesting. Please supplement this with your own research. Thank you for reading, please give me feedback so that I can increase my standards for future analysis posts. If I have made a mistake, please correct me. Or if you have one that you want an analysis on, I might pick a comment to do an analysis of if I don't have any spice stored for the week.

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Silgan Holdings Inc. - A Speculative Analysis (NYSE: SLGN)

bullish

Introduction:

Welcome back to my weekly stock analysis. Disclaimer: I am not invested in this one.

Silgan Holdings Inc. (NYSE: SLGN)

Sector: Packaging (Industry)

Company Strengths & Risks:

Silgan is a leading supplier of rigid packaging for consumer goods. Silgan has 109 manufacturing facilities across 4 listed continents. They also claim to be the leading supplier of metal containers in North America and Europe for food and general line items. SLGN is based in Connecticut and is fairly recent (founded in 1987) and faced debt issues in the early 1990s and 2000s. The company seems to have shaped up.

Strengths: - Current leading supplier of packaging with continental diversity - Great PE ratio - Great dividend growth rates - Low payout ratio - Paid increasing dividend since 2004*

Risks: - Low yield - Many competitors in the packaging sector - Low projected current returns

Financial History and numbers

SLGN: Numbers from Seeking Alpha as of Feb 14, 2022

Numbers from Macro Trends as of Feb 14, 2022

Stock SLGN
P/E Ratio 11.03
Stock price $42.46
Current Annual Payout/Share $0.56
Yield 1.32%
5 Yr Div Growth Rate 10.49%
3 Yr Div Growth Rate 11.87%
1 Yr Div Growth Rate 16.67%
Years Of Growth 4
Current Payout Ratio 16.42%
Free Cash Flow / Share 0.9176
Revenue (ttm) 5.465B
Debt / Equity Ratio 2.191
Debt / EBITDA 4.005
EPS 3.85
ROI 7.70%
ROA 5.00%

These numbers suggest to me a company shaping up but not exactly all there. The company seems committed to raising the dividend and keep plugging along. The issue is that the debt is absurdly high (possibly due to the numerous acquisitions, including a hand in CPB in 1998). SLGN does not have a good projected return but this may be due to debt ratios. That said, the payout ratio and PE ratio look enticing.

I will now use the 3 year dividend growth rate to project further.

Year SLGN
2022 0.63
2023 0.70
2024 0.78
2025 0.88

For another way, let's use historical payout ratio to project out.

YEAR SLGN
EPS estimate 2021 3.85
EPS estimate 2022 4.09
2021 dividend 0.63
2022 dividend 0.67

Final Thoughts:

I have to be honest before I go into my usual conclusion. I do not like that SLGN seems to be acquiring so much without the ebitda to match. With the current trend, I don't expect a change from the horizontal trading we have seen thus far. If they ever stop the acquisition train, maybe they can break out above 44 again.

If I am allowed to use past actions, SLGN seems to want to drop the debt to equity ratio to about 1.5-1.8 before raising debt again. The fact that they're approaching 2 again means it might be time for another acquisition. This is a huge point of concern for me. More debt on top of a 4.01 debt to ebitda ratio may mean that their acquisitions or partnerships have not been optimal. I can't imagine how long they'll keep the leading manufacturer status, but I do not know if I like the direction of the company fully.

Also to address the 4 year dividend growth dip. This coincided with a 2 for 1 stock split, so I am willing to be a bit lenient there. SLGN raised the dividend back to the normal level and has grown ever since. Thus, if I had to be less biased, I would be willing to give the full 18 year dividend growth mark. I leave it up to the reader if another event was linked to this dividend drop.

This all being said- I expect SLGN to keep doing its thing and raising the dividend. Whether or not the company is worth 43$ is another story.

Weekly price estimate for a future date, via consulting the crystal ball: Predicted price for SLGN for Jun 20, 2022: $42.85. There is no factual basis that I will give.

I hope someone out there found this post interesting. Please supplement this with your own research.

Thank you for reading, please give me feedback so that I can increase my standards for future analysis posts. If I have made a mistake, please correct me. Or if you have one that you want an analysis on, I might pick a comment to do an analysis of if I don't have any spice stored for the week.

read-time
3 min
47.85
Target Price
7/ 10
Confidence
2-6 Months
Timeframe
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