Has Prospect Capital (PSEC) Outpaced Other Finance Stocks This Year?
With continued focus on improving manufacturing efficiencies and a growing operating income, Silgan Holdings Inc. SLGN appears a solid bet now. Further, synergies of the Dispensing Systems acquisition are anticipated to yield positive results for the stock.
Let’s delve deeper and find out what are the factors that make this supplier of rigid packaging for consumer goods products an attractive investment option.
What’s Working in Favor of Silgan Holdings?
Solid Rank & VGM Score: Silgan Holdings currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The company also has a Value Growth Momentum Score (VGM Score) of A. Our research shows that stocks with a VGM Score of A or B, combined with a Zacks Rank #1 or 2, offer the best investment opportunities. Thus, the company appears to be a compelling investment proposition at the moment.
Above the Industry: Silgan Holdings’ shares have outperformed the industry with respect to price performance over the past six months. The company’s shares have lost around 0.4%, while the industry incurred a loss of 0.9% during the same time frame.
Upward Estimate Revisions: The Zacks Consensus Estimate for earnings per share for 2018 has moved up 11% to $2.09 in the last 60 days. The same for 2019 has gone up 9% to $2.24 during the same time frame.
Superior Return on Assets (ROA): Silgan Holdings’ ROA of 5.3%, as compared with the industry average of 4.1%, highlights the company’s efficiency in generating earnings by effectively managing assets.
Upbeat Guidance: For 2018, Silgan Holdings guided adjusted earnings per share in the range of $2.03-$2.13. The mid-point of this range depicts year-over-year growth of 26%. The company expects improvement in sales and operating income across all its segments. For first-quarter 2018, the company initiated a guidance range of 32-36 cents for adjusted earnings per share, reflecting year-over-year growth of around 10%. This increase is primarily a result of the inclusion of the Dispensing Systems operation and the benefit of the lower effective tax rate.
Growth Drivers in Place: Silgan Holdings’ metal container business will benefit from continued manufacturing efficiencies and the lagged contractual pass through of raw material inflation to customers. Further, the company’s closures business is expected to gain from the Dispensing Systems operations, including synergies, continued benefits of manufacturing efficiencies and higher unit volumes. The company also anticipates its plastic container business to gain from continued manufacturing efficiencies and volume growth.
Thus, Silgan Holdings’ cash flow performance will grow on the back of improved operating income in each business, net improvement in working capital as a result of the significant reduction in inventories in the metal container business, and lower cash taxes.
Silgan has a long-term earnings growth rate of 10%.
Other Stocks to Consider
Some other similarly-ranked stocks in the sector include Avery Dennison Corporation AVY, AptarGroup, Inc. ATR and Deere & Company DE.
Avery Dennison has a long-term earnings growth rate of 7%. Its shares have rallied 22.6%, over the past six months.
AptarGroup has a long-term earnings growth rate of 8.5%. The company’s shares have been up 7.4% during the same time frame.
Deere has a long-term earnings growth rate of 8.2%. The stock has gained 24.2% in six months’ time.
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Silgan Holdings Inc. (SLGN) : Free Stock Analysis Report
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