Twenty-two years ago, a couple of Continental Can executives decided to go into business together. Philip Silver and Greg Horrigan were going to buy their way to the big time. Despite accumulating a fair chunk of debt over the years, today they can safely claim success. In a little more than two decades, Silgan Holdings (Nasdaq:SLGN) has increased its market share in metal cans from 10-50% through the skillful acquisition and integration of 23 businesses. It's hard to bring one purchase into the fold, let alone 23. Silver and Horrigan are to be commended for a job well done. Not everyone predicted such a future. At the time of its IPO in early 1997, a Standard and Poor's analyst Mark Basham said Silgan "is certainly not going to be a big winner," though Silver and Horrigan's personal bankers would disagree.

An IPO Home Run
Its first day of trading was February 14, 1997. Initially priced at $20 a share, the stock closed at $22.12, up 10.6%. It's been onward and upward ever since, gaining 371% compared to 14% for the S&P 500. As of July 2, 2009, it's up 2%, which is 30% better than the index. What has been its secret to success, despite a terrible economy? Consistent growth. In 2008, it grew revenues 6.8% or $198 million to $3.12 billion and eked out a 2.1% or $5.5 million gain in income from operations year-over-year.

Steady as She Goes
Silgan announced first quarter earnings April 30, 2009 and they were exactly as management expected with revenues down 3.6% to $655.5 million from $679.8 million while operating earnings were up 7.6% to $53.6 million from $49.8 million. That doesn't tell the entire story. Its interest expense was $10.4 million or 36% lower in Q1 than in the same quarter last year, resulting in diluted earnings per share increasing 17 cents or 31% to 72 cents. Most importantly, management affirmed its 2009 guidance of between $3.72 and $3.92 a share. At the low end, we're talking about a current price-to-earnings ratio of 13. Compare that to some of its peer group, the Dow Jones Containers and Packaging index below - there's definitely more room for its stock to grow in the future.

Dow Jones U.S. Containers and Packaging Index Peer Group

Company Forward P/E P/B
Silgan Holdings (Nasdaq:SLGN) 12 3.5
Ball Corp. (NYSE:BLL) 11 4
Aptar Group (NYSE:ATR) 17 2
Crown Holdings (NYSE:CCK) 11 Negative Equity
Owens-Illinois (NYSE:OI) 8 4.8
Source: Yahoo! Finance as of June 3, 2009

The Bottom Line
In late May, Goldman Sachs analyst Richard Skidmore cut its rating for the specialty packaging industry from "attractive" to "neutral," suggesting earnings per share growth will be slower than the S&P 500 index because it did not suffer from the recession like other industries and as a result it won't benefit from the resulting recovery. Further, he cut Silgan's 2009 EPS from $3.75-3.60. That doesn't jive with company guidance or Robert W. Baird's "buy" rating of mid-May. The fact the two founders have maintained an ownership interest around 30% for over a decade since its IPO is an indication they are in this for the long haul, despite ceding day-to-day management of the company. If it says it will do upward of $3.72 a share in earnings in 2009, there's no logical reason to doubt it.

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