Crown Holdings trades at $80.54 per share and has stayed right on track with the overall market, gaining 10.4% over the last six months. At the same time, the S&P 500 has returned 7%.
Is there a buying opportunity in Crown Holdings, or does it present a risk to your portfolio? Get the full breakdown from our expert analysts, it’s free.We don't have much confidence in Crown Holdings. Here are three reasons why you should be careful with CCK and a stock we'd rather own.
Why Do We Think Crown Holdings Will Underperform?
Formerly Crown Cork & Seal, Crown Holdings (NYSE:CCK) produces packaging products for consumer marketing companies, including food, beverage, household, and industrial products.
1. Long-Term Revenue Growth Flatter Than a Pancake
Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Unfortunately, Crown Holdings struggled to consistently increase demand as its $11.76 billion of sales for the trailing 12 months was close to its revenue five years ago. This fell short of our benchmarks and is a sign of poor business quality. 
2. Declining Constant Currency Revenue, Demand Takes a Hit
In addition to reported revenue, constant currency revenue is a useful data point for analyzing Industrial Packaging companies. This metric excludes currency movements, which are outside of Crown Holdings’s control and are not indicative of underlying demand.
Over the last two years, Crown Holdings’s constant currency revenue averaged 4.7% year-on-year declines. This performance was underwhelming and implies there may be increasing competition or market saturation. It also suggests Crown Holdings might have to lower prices or invest in product improvements to accelerate growth, factors that can hinder near-term profitability. 
3. EPS Barely Growing
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Crown Holdings’s EPS grew at a weak 3.7% compounded annual growth rate over the last five years. On the bright side, this performance was better than its flat revenue and tells us management responded to softer demand by adapting its cost structure.
Final Judgment
Crown Holdings falls short of our quality standards. That said, the stock currently trades at 12× forward price-to-earnings (or $80.54 per share). While this valuation is fair, the upside isn’t great compared to the potential downside. There are better stocks to buy right now. We’d recommend looking at Wabtec, a leading provider of locomotive services benefiting from an upgrade cycle.
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