Silgan Holdings trades at $55.84 per share and has stayed right on track with the overall market, gaining 9.4% over the last six months. At the same time, the S&P 500 has returned 5.6%.
Is now the time to buy Silgan Holdings, or should you be careful about including it in your portfolio? Get the full breakdown from our expert analysts, it’s free.
Why Do We Think Silgan Holdings Will Underperform?
We don't have much confidence in Silgan Holdings. Here are three reasons why we avoid SLGN and a stock we'd rather own.
1. Long-Term Revenue Growth Disappoints
A company’s long-term sales performance is one signal of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Unfortunately, Silgan Holdings’s 6% annualized revenue growth over the last five years was tepid. This was below our standard for the industrials sector. 
2. Core Business Falling Behind as Demand Declines
We can better understand Industrial Packaging companies by analyzing their organic revenue. This metric gives visibility into Silgan Holdings’s core business because it excludes one-time events such as mergers, acquisitions, and divestitures along with foreign currency fluctuations - non-fundamental factors that can manipulate the income statement.
Over the last two years, Silgan Holdings’s organic revenue averaged 4.4% year-on-year declines. This performance was underwhelming and implies it may need to improve its products, pricing, or go-to-market strategy. It also suggests Silgan Holdings might have to lean into acquisitions to grow, which isn’t ideal because M&A can be expensive and risky (integrations often disrupt focus). 
3. EPS Took a Dip Over the Last Two Years
Although long-term earnings trends give us the big picture, we like to analyze EPS over a shorter period to see if we are missing a change in the business.
Sadly for Silgan Holdings, its EPS and revenue declined by 2.7% and 3% annually over the last two years. We tend to steer our readers away from companies with falling revenue and EPS, where diminishing earnings could imply changing secular trends and preferences. If the tide turns unexpectedly, Silgan Holdings’s low margin of safety could leave its stock price susceptible to large downswings.
Final Judgment
Silgan Holdings doesn’t pass our quality test. That said, the stock currently trades at 13.4× forward P/E (or $55.84 per share). While this valuation is reasonable, we don’t see a big opportunity at the moment. There are more exciting stocks to buy at the moment. We’d suggest looking at one of our top digital advertising picks.
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