Hormel Foods Corp Valuation – March 2019 #HRL

Company Profile (excerpt from Reuters): Hormel Foods Corporation, incorporated on September 20, 1928, is engaged in the production of a range of meat and food products and the marketing of those products throughout the United States and internationally. The Company is a processor of branded and unbranded food products for retail, foodservice and fresh product customers. The Company operates through four segments: Grocery Products, Refrigerated Foods, Jennie-O Turkey Store (JOTS) and International & Other. The Company’s Grocery Products segment is engaged in the processing, marketing and sale of shelf-stable food products sold for the retail market and also consist of health and nutrition products, including Muscle Milk protein products. The Grocery Products segment also includes the Company’s MegaMex Foods, LLC (MegaMex) joint venture. The Company’s Refrigerated Foods segment consists of the processing, marketing and sale of branded and unbranded pork, beef, chicken and turkey products for retail, foodservice and fresh product customers. The Company’s JOTS segment consists of the processing, marketing and sale of branded and unbranded turkey products for retail, foodservice and fresh product customers. The Company’s International & Other segment includes Hormel Foods International Corporation (HFIC), which manufactures, markets and sells the Company’s products internationally. The International & Other segment also includes the Company’s international joint ventures.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of HRL – March 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $23,494,749,686 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.46 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 104.74% Pass
6. Moderate PEmg Ratio PEmg < 20 25.84 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.20 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.46 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.38 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.70
MG Growth Estimate 8.16%
MG Value $42.10
Opinion Fairly Valued
MG Grade B
MG Value based on 3% Growth $24.60
MG Value based on 0% Growth $14.42
Market Implied Growth Rate 8.67%
Current Price $43.84
% of Intrinsic Value 104.13%

Hormel Foods Corp is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg and PB ratios. The Enterprising Investor is only concerned with the low current ratio. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $1.1 in 2015 to an estimated $1.7 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 8.67% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Hormel Foods Corp revealed the company was trading above its Graham Number of $20.32. The company pays a dividend of $0.75 per share, for a yield of 1.7% Its PEmg (price over earnings per share – ModernGraham) was 25.84, which was below the industry average of 26.89, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-0.64.

Hormel Foods Corp performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$0.64
Graham Number $20.32
PEmg 25.84
Current Ratio 1.46
PB Ratio 4.20
Current Dividend $0.75
Dividend Yield 1.71%
Number of Consecutive Years of Dividend Growth 20

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 1/1/2019
Total Current Assets $2,100,686,000
Total Current Liabilities $1,435,812,000
Long-Term Debt $250,000,000
Total Assets $8,155,398,000
Intangible Assets $3,921,741,000
Total Liabilities $2,449,619,000
Shares Outstanding (Diluted Average) 547,118,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.75
Oct2018 $1.86
Oct2017 $1.57
Oct2016 $1.64
Oct2015 $1.27
Oct2014 $1.12
Oct2013 $0.98
Oct2012 $0.93
Oct2011 $0.87
Oct2010 $0.73
Oct2009 $0.63
Oct2008 $0.52
Oct2007 $0.54
Oct2006 $0.51
Oct2005 $0.46
Oct2004 $0.42
Oct2003 $0.33
Oct2002 $0.34
Oct2001 $0.33
Oct2000 $0.30
Oct1999 $0.28

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.70
Oct2018 $1.61
Oct2017 $1.43
Oct2016 $1.30
Oct2015 $1.10
Oct2014 $0.98
Oct2013 $0.89
Oct2012 $0.81
Oct2011 $0.72
Oct2010 $0.62
Oct2009 $0.56
Oct2008 $0.51
Oct2007 $0.49
Oct2006 $0.44
Oct2005 $0.40
Oct2004 $0.36
Oct2003 $0.32

Recommended Reading:

Other ModernGraham posts about the company

Best Dividend Paying Stocks for Dividend Growth Investors – February 2019
Best Dividend Paying Stocks for Dividend Growth Investors – August 2018
Best Dividend Paying Stocks for Dividend Growth Investors – June 2018
Hormel Foods Corp Valuation – June 2018 $HRL
Best Dividend Paying Stocks for Dividend Growth Investors – August 2017

Other ModernGraham posts about related companies

JM Smucker Co Valuation – March 2019 #SJM
Lamb Weston Holdings Inc Valuation – March 2019 #LW
Kraft Heinz Co Valuation – March 2019 #KHC
Sysco Corp Valuation – March 2019 $SYY
General Mills Inc Valuation – February 2019 $GIS
McCormick & Co Valuation – February 2019 $MKC
Archer-Daniels Midland Co Valuation – February 2019 $ADM
Conagra Brands Inc Valuation – February 2019 $CAG
Monster Beverage Corp Valuation – February 2019 $MNST
Campbell Soup Co Valuation – January 2019 $CPB

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Hormel Foods Corp Valuation – June 2018 $HRL

Company Profile (excerpt from Reuters): Hormel Foods Corporation, incorporated on September 20, 1928, is engaged in the production of a range of meat and food products and the marketing of those products throughout the United States and internationally. The Company is a processor of branded and unbranded food products for retail, foodservice and fresh product customers. The Company operates through four segments: Grocery Products, Refrigerated Foods, Jennie-O Turkey Store (JOTS) and International & Other. The Company’s Grocery Products segment is engaged in the processing, marketing and sale of shelf-stable food products sold for the retail market and also consist of health and nutrition products, including Muscle Milk protein products. The Grocery Products segment also includes the Company’s MegaMex Foods, LLC (MegaMex) joint venture. The Company’s Refrigerated Foods segment consists of the processing, marketing and sale of branded and unbranded pork, beef, chicken and turkey products for retail, foodservice and fresh product customers. The Company’s JOTS segment consists of the processing, marketing and sale of branded and unbranded turkey products for retail, foodservice and fresh product customers. The Company’s International & Other segment includes Hormel Foods International Corporation (HFIC), which manufactures, markets and sells the Company’s products internationally. The International & Other segment also includes the Company’s international joint ventures.

HRL Chart

HRL data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of HRL – June 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $19,386,243,980 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.61 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 125.26% Pass
6. Moderate PEmg Ratio PEmg < 20 22.92 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.76 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.61 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.89 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.60
MG Growth Estimate 9.35%
MG Value $43.45
Opinion Fairly Valued
MG Grade B
MG Value based on 3% Growth $23.16
MG Value based on 0% Growth $13.58
Market Implied Growth Rate 7.21%
Current Price $36.61
% of Intrinsic Value 84.27%

Hormel Foods Corp is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg and PB ratios. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $0.98 in 2014 to an estimated $1.6 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 7.21% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Hormel Foods Corp revealed the company was trading above its Graham Number of $19.56. The company pays a dividend of $0.68 per share, for a yield of 1.9% Its PEmg (price over earnings per share – ModernGraham) was 22.92, which was below the industry average of 24.35, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-1.27.

Hormel Foods Corp performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$1.27
Graham Number $19.56
PEmg 22.92
Current Ratio 1.61
PB Ratio 3.76
Current Dividend $0.68
Dividend Yield 1.86%
Number of Consecutive Years of Dividend Growth 20

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 4/1/2018
Total Current Assets $1,850,780,000
Total Current Liabilities $1,148,461,000
Long-Term Debt $624,763,000
Total Assets $7,829,749,000
Intangible Assets $3,983,252,000
Total Liabilities $2,538,116,000
Shares Outstanding (Diluted Average) 542,811,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.82
Oct2017 $1.57
Oct2016 $1.64
Oct2015 $1.27
Oct2014 $1.12
Oct2013 $0.98
Oct2012 $0.93
Oct2011 $0.87
Oct2010 $0.73
Oct2009 $0.63
Oct2008 $0.52
Oct2007 $0.54
Oct2006 $0.51
Oct2005 $0.46
Oct2004 $0.42
Oct2003 $0.33
Oct2002 $0.34
Oct2001 $0.33
Oct2000 $0.30
Oct1999 $0.28
Oct1998 $0.23

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.60
Oct2017 $1.43
Oct2016 $1.30
Oct2015 $1.10
Oct2014 $0.98
Oct2013 $0.89
Oct2012 $0.81
Oct2011 $0.72
Oct2010 $0.62
Oct2009 $0.56
Oct2008 $0.51
Oct2007 $0.49
Oct2006 $0.44
Oct2005 $0.40
Oct2004 $0.36
Oct2003 $0.32
Oct2002 $0.31

Recommended Reading:

Other ModernGraham posts about the company

Best Dividend Paying Stocks for Dividend Growth Investors – August 2017
Best Dividend Paying Stocks for Dividend Growth Investors – March 2017
6 Best Stocks for Value Investors This Week – 3/11/17
Hormel Foods Corp Valuation – March 2017 $HRL
Best Dividend Paying Stocks for Dividend Growth Investors – February 2017

Other ModernGraham posts about related companies

J M Smucker Co Valuation – May 2018 $SJM
Kraft Heinz Co Valuation – May 2018 $KHC
Dr Pepper Snapple Group Inc Valuation – May 2018 $DPS
Sysco Corp Valuation – May 2018 $SYY
General Mills Inc Valuation – May 2018 $GIS
Archer-Daniels Midland Co Valuation – May 2018 $ADM
Conagra Brands Inc Valuation – May 2018 $CAG
McCormick & Co Inc Valuation – May 2018 $MKC
Monster Beverage Corp Valuation – April 2018 $MNST
Campbell Soup Co Valuation – March 2018 $CPB

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Hormel Foods Corp Valuation – March 2017 $HRL

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – February 2017.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Hormel Foods Corp (HRL) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Hormel Foods Corporation is engaged in the production of a range of meat and food products. The Company operates through five segments: Grocery Products, which is engaged in the processing, marketing and sale of shelf-stable food products sold for the retail market; Refrigerated Foods, which consists of the processing, marketing and sale of branded and unbranded pork, beef, chicken and turkey products for retail, foodservice and fresh product customers; Jennie-O Turkey Store (JOTS), which consists of the processing, marketing and sale of branded and unbranded turkey products for retail, foodservice and fresh product customers; Specialty Foods, which consists of the packaging and sale of nutritional and private label shelf-stable products to industrial, retail and foodservice customers, and International & Other, which includes Hormel Foods International Corporation, which manufactures, markets and sells the Company products internationally.

HRL Chart

HRL data by YCharts

[level-free]
To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Recent valuations of the components of the Dow Jones Industrial Average are available for free members, including this one of Microsoft Corporation.  In addition, here is a post detailing what can be found within each individual company’s valuation.

Learn More About Premium Membership

[/level-free]
[not-level-free]

Downloadable PDF version of this valuation:

ModernGraham Valuation of HRL – March 2017

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $18,223,084,174 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.30 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 142.17% Pass
6. Moderate PEmg Ratio PEmg < 20 23.81 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.09 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.30 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.21 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $1.46
MG Growth Estimate 9.63%
MG Value $40.41
Opinion Fairly Valued
MG Grade B
MG Value based on 3% Growth $21.11
MG Value based on 0% Growth $12.37
Market Implied Growth Rate 7.66%
Current Price $34.66
% of Intrinsic Value 85.77%

Hormel Foods Corp is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the high PEmg and PB ratios. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $0.89 in 2013 to an estimated $1.46 for 2017. This level of demonstrated earnings growth supports the market’s implied estimate of 7.65% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Hormel Foods Corp revealed the company was trading above its Graham Number of $17.73. The company pays a dividend of $0.61 per share, for a yield of 1.7% Its PEmg (price over earnings per share – ModernGraham) was 23.8, which was below the industry average of 24.74, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $0.61.

Hormel Foods Corp performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $0.61
Graham Number $17.73
PEmg 23.80
Current Ratio 2.30
PB Ratio 4.09
Current Dividend $0.61
Dividend Yield 1.75%
Number of Consecutive Years of Dividend Growth 20

[/not-level-free]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 1/1/2017
Total Current Assets $2,119,586,000
Total Current Liabilities $919,762,000
Long-Term Debt $250,000,000
Total Assets $6,366,398,000
Intangible Assets $2,709,468,000
Total Liabilities $1,791,101,000
Shares Outstanding (Diluted Average) 540,064,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.65
Oct2016 $1.64
Oct2015 $1.27
Oct2014 $1.12
Oct2013 $0.98
Oct2012 $0.93
Oct2011 $0.87
Oct2010 $0.73
Oct2009 $0.63
Oct2008 $0.52
Oct2007 $0.54
Oct2006 $0.51
Oct2005 $0.46
Oct2004 $0.42
Oct2003 $0.33
Oct2002 $0.34
Oct2001 $0.33
Oct2000 $0.30
Oct1999 $0.28
Oct1998 $0.23
Oct1997 $0.18

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.46
Oct2016 $1.30
Oct2015 $1.10
Oct2014 $0.98
Oct2013 $0.89
Oct2012 $0.81
Oct2011 $0.72
Oct2010 $0.62
Oct2009 $0.56
Oct2008 $0.51
Oct2007 $0.49
Oct2006 $0.44
Oct2005 $0.40
Oct2004 $0.36
Oct2003 $0.32
Oct2002 $0.31
Oct2001 $0.29

Recommended Reading:

Other ModernGraham posts about the company

Hormel Foods Corp Stock Valuation – February 2016 $HRL
Hormel Foods Corporation Analysis – September 2015 Update $HRL
The 10 Best Stocks For Value Investors This Week – 6/20/15
Hormel Foods Corporation Analysis – June 2015 Update $HRL
The Best Companies of the Food Processing Industry – June 2015

Other ModernGraham posts about related companies

Lancaster Colony Corp Valuation – Initial Coverage $LANC
J M Smucker Co Valuation – February 2017 $SJM
Kraft Heinz Co Valuation – Initial Coverage $KHC
Dr Pepper Snapple Group Inc Valuation – January 2017 $DPS
J&J Snack Foods Corp Valuation – Initial Coverage $JJSF
Sysco Corporation Valuation – January 2017 $SYY
General Mills Inc Valuation – January 2017 $GIS
Coca-Cola European Partners PLC Valuation – January 2017 $CCE
Archer Daniels Midland Company Valuation – January 2017 $ADM
McCormick & Company Valuation – January 2017 $MKC

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Hormel Foods Corp Valuation – August 2016 $HRL

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – August 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Hormel Foods Corp (HRL) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Hormel Foods Corporation is a multinational manufacturer and marketer of food and meat products. The Company operates through five segments: Grocery Products, which consists of the processing, marketing and sale of shelf-stable food products sold in the retail market; Refrigerated Foods, which consists of the processing, marketing and sale of branded and unbranded pork and beef products for retail, foodservice and fresh product customers; Jennie-O Turkey Store, which consists of the processing, marketing and sale of branded and unbranded turkey products for retail, foodservice and fresh product customers; Specialty Foods, which consists of the packaging and sale of private label shelf stable products, nutritional products, sugar and condiments to industrial, retail and foodservice customers, and International & Other, which includes the Hormel Foods International Corporation, which manufactures, markets and sells the Company products internationally.

HRL Chart

HRL data by YCharts

[level-free]
To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

[/level-free]
[not-level-free]

Downloadable PDF version of this valuation:

ModernGraham Valuation of HRL – August 2016

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $20,261,470,094 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.78 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 135.55% Pass
6. Moderate PEmg Ratio PEmg < 20 29.96 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.77 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.78 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.28 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

HRL value chart August 2016

EPSmg $1.29
MG Growth Estimate 8.98%
MG Value $34.15
Opinion Overvalued
MG Grade B-
MG Value based on 3% Growth $18.71
MG Value based on 0% Growth $10.97
Market Implied Growth Rate 10.73%
Current Price $38.66
% of Intrinsic Value 113.22%

Hormel Foods Corp is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg and PB ratios. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $0.81 in 2012 to an estimated $1.29 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 10.73% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Hormel Foods Corp revealed the company was trading above its Graham Number of $17.33. The company pays a dividend of $0.56 per share, for a yield of 1.4% Its PEmg (price over earnings per share – ModernGraham) was 29.96, which was below the industry average of 30.19, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $0.03.

Hormel Foods Corp performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

HRL charts August 2016

Net Current Asset Value (NCAV) $0.03
Graham Number $17.33
PEmg 29.96
Current Ratio 1.78
PB Ratio 4.77
Current Dividend $0.56
Dividend Yield 1.45%
Number of Consecutive Years of Dividend Growth 20

[/not-level-free]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 7/1/2016
Total Current Assets $2,010,105,000
Total Current Liabilities $1,128,727,000
Long-Term Debt $250,000,000
Total Assets $6,388,297,000
Intangible Assets $2,737,207,000
Total Liabilities $1,994,350,000
Shares Outstanding (Diluted Average) 542,163,000

Earnings Per Share History

Next Fiscal Year Estimate $1.61
Oct2015 $1.27
Oct2014 $1.12
Oct2013 $0.98
Oct2012 $0.93
Oct2011 $0.87
Oct2010 $0.73
Oct2009 $0.63
Oct2008 $0.52
Oct2007 $0.54
Oct2006 $0.51
Oct2005 $0.46
Oct2004 $0.42
Oct2003 $0.33
Oct2002 $0.34
Oct2001 $0.33
Oct2000 $0.30
Oct1999 $0.28
Oct1998 $0.23
Oct1997 $0.18
Oct1996 $0.13

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $1.29
Oct2015 $1.10
Oct2014 $0.98
Oct2013 $0.89
Oct2012 $0.81
Oct2011 $0.72
Oct2010 $0.62
Oct2009 $0.56
Oct2008 $0.51
Oct2007 $0.49
Oct2006 $0.44
Oct2005 $0.40
Oct2004 $0.36
Oct2003 $0.32
Oct2002 $0.31
Oct2001 $0.29
Oct2000 $0.25

Recommended Reading:

Other ModernGraham posts about the company

Hormel Foods Corp Stock Valuation – February 2016 $HRL
Hormel Foods Corporation Analysis – September 2015 Update $HRL
Hormel Foods Corporation Analysis – September 2015 Update $HRL
The 10 Best Stocks For Value Investors This Week – 6/20/15
Hormel Foods Corporation Analysis – June 2015 Update $HRL

Other ModernGraham posts about related companies

J.M. Smucker Co Valuation – August 2016 $SJM
General Mills Inc Valuation – August 2016 $GIS
Archer Daniels Midland Co – August 2016 $ADM
Coca-Cola Co Valuation – July 2016 $KO
Monster Beverage Corp Valuation – July 2016 $MNST
Campbell Soup Company Valuation – July 2016 $CPB
Kellogg Company Valuation – July 2016 $K
Hershey Co Valuation – July 2016 $HSY
PepsiCo Inc Valuation – July 2016 $PEP
Mead Johnson Nutrition Valuation – June 2016 $MJN

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Hormel Foods Corp Stock Valuation – February 2016 $HRL

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Companies Benjamin Graham Would Invest In Today – February 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Hormel Foods Corp (HRL) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Hormel Foods Corporation is a multinational manufacturer and marketer of food and meat products. The Company has five segments: Grocery Products, which consists of the processing, marketing and sale of shelf-stable food products sold primarily in the retail market; Refrigerated Foods, which consists of the processing, marketing and sale of branded and unbranded pork and beef products for retail, foodservice and fresh product customers; Jennie-O Turkey Store, which consists of the processing, marketing and sale of branded and unbranded turkey products for retail, foodservice and fresh product customers; Specialty Foods, which consists of the packaging and sale of private label shelf stable products, nutritional products, sugar and condiments to industrial, retail and foodservice customers, and International & Other, which includes the Hormel Foods International operating segment, which manufactures, markets and sells the Company products internationally.

[level-free]

To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

[/level-free]
[not-level-free]

Downloadable PDF version of this valuation:

ModernGraham Valuation of HRL

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $21,825,781,029 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.70 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 124.94% Pass
6. Moderate PEmg Ratio PEmg < 20 33.72 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.61 Fail
Score
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.70 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.29 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

HRL value chart February 2016

EPSmg $1.23
MG Growth Estimate 7.87%
MG Value $29.82
Opinion Overvalued
MG Grade C+
MG Value based on 3% Growth $17.84
MG Value based on 0% Growth $10.46
Market Implied Growth Rate 12.61%
Current Price $41.49
% of Intrinsic Value 139.16%

Hormel Foods Corp is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg and PB ratios. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $0.81 in 2012 to an estimated $1.23 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 12.61% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value below the price. Hormel Foods Corp receives an average overall rating in the ModernGraham grading system, scoring a C+.

Stage 3: Information for Further Research

HRL charts February 2016

Net Current Asset Value (NCAV) -$0.15
Graham Number $15.42
PEmg 33.72
Current Ratio 1.70
PB Ratio 5.61
Dividend Yield 1.21%
Number of Consecutive Years of Dividend Growth 20

[/not-level-free]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information Oct2015
Total Current Assets $2,063,032,000
Total Current Liabilities $1,214,025,000
Long-Term Debt $250,000,000
Total Assets $6,139,831,000
Intangible Assets $2,526,703,000
Total Liabilities $2,141,633,000
Shares Outstanding (Diluted Average) 541,002,000

Earnings Per Share History

Next Fiscal Year Estimate $1.43
Oct2015 $1.27
Oct2014 $1.12
Oct2013 $0.98
Oct2012 $0.93
Oct2011 $0.87
Oct2010 $0.73
Oct2009 $0.63
Oct2008 $0.52
Oct2007 $0.54
Oct2006 $0.51
Oct2005 $0.46
Oct2004 $0.42
Oct2003 $0.33
Oct2002 $0.34
Oct2001 $0.33
Oct2000 $0.30
Oct1999 $0.28
Oct1998 $0.23
Oct1997 $0.18
Oct1996 $0.13

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $1.23
Oct2015 $1.10
Oct2014 $0.98
Oct2013 $0.89
Oct2012 $0.81
Oct2011 $0.72
Oct2010 $0.62
Oct2009 $0.56
Oct2008 $0.51
Oct2007 $0.49
Oct2006 $0.44
Oct2005 $0.40
Oct2004 $0.36
Oct2003 $0.32
Oct2002 $0.31
Oct2001 $0.29
Oct2000 $0.25

Recommended Reading:

Other ModernGraham posts about the company

Hormel Foods Corporation Analysis – September 2015 Update $HRL
The 10 Best Stocks For Value Investors This Week – 6/20/15
Hormel Foods Corporation Analysis – June 2015 Update $HRL
The Best Companies of the Food Processing Industry – June 2015
18 Companies in the Spotlight This Week – 3/15/15

Other ModernGraham posts about related companies

J.M. Smucker Co Valuation – February 2016 $SJM
Archer-Daniels Midland Co Valuation – February 2016 $ADM
Keurig Green Mountain Inc Valuation – January 2016 Update $GMCR
Monster Beverage Corp Valuation – January 2016 Update $MNST
Monster Beverage Corp Valuation – January 2016 Update $MNST
Mead Johnson Nutrition Co Valuation – November 2015 Update $MJN
Archer Daniels Midland Valuation – November 2015 Update $ADM
The Best Companies of the Food Processing Industry – October 2015
J.M. Smucker Company Valuation – October 2015 Update $SJM
Keurig Green Mountain Inc. Valuation – October 2015 Update $GMCR

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Hormel Foods Corporation Analysis – September 2015 Update $HRL

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Most Undervalued Companies for the Defensive Investor – August 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Hormel Foods Corporation (HRL) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Hormel Foods Corporation is primarily engaged in the production of a variety of meat and food products and the marketing of those products throughout the United States and internationally. The Company markets its products through Hormel Foods International Corporation, a wholly owned subsidiary. The Company operates in five segments: Grocery Products, Refrigerated Foods, Jennie-O Turkey Store (JOTS), Specialty Foods, and International & Other. The meat products are sold fresh, frozen, cured, smoked, cooked, and canned. Perishable meat includes fresh meats, refrigerated meal solutions, sausages, hams, wieners, and bacon. The Poultry composed primarily of JOTS products. Shelf-stable includes canned luncheon meats, shelf-stable microwaveable meals, stews, chilies, hash, meat spreads, flour and corn tortillas, salsas, tortilla chips, peanut butter, and other items that do not require refrigeration. The Other category primarily consists of nutritional food products and supplements.

[level-free]

To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

[/level-free]
[level-mg-stocks-screens-subscriber]

Downloadable PDF version of this valuation:

ModernGraham Valuation of HRL – September 2015

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $16,096,217,580 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.61 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 112.38% Pass
6. Moderate PEmg Ratio PEmg < 20 28.01 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.21 Fail
Score
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.61 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.33 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

HRL value Chart September 2015

EPSmg $2.19
MG Growth Estimate 7.87%
MG Value $52.97
Opinion Overvalued
MG Value based on 3% Growth $31.69
MG Value based on 0% Growth $18.58
Market Implied Growth Rate 9.76%
Current Price $61.22
% of Intrinsic Value 115.57%

Hormel Foods Corporation qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned by the low current ratio and the high PEmg and PB ratios, while the Enterprising Investor has no initial concerns.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $1.43 in 2011 to an estimated $2.19 for 2015.  This level of demonstrated earnings growth does not support the market’s implied estimate of 9.76% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value below the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Hormel Foods Corporation (HRL)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Stage 3: Information for Further Research

HRL Charts September 2015

Net Current Asset Value (NCAV) -$0.57
Graham Number $28.99
PEmg 28.01
Current Ratio 1.61
PB Ratio 4.21
Dividend Yield 1.55%
Number of Consecutive Years of Dividend Growth 20

 

[/level-mg-stocks-screens-subscriber]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Total Current Assets $2,003,776,000
Total Current Liabilities $1,245,107,000
Long-Term Debt $250,000,000
Total Assets $6,091,081,000
Intangible Assets $2,527,874,000
Total Liabilities $2,158,295,000
Shares Outstanding (Diluted Average) 270,602,000

Earnings Per Share History

Next Fiscal Year Estimate $2.51
Oct14 $2.23
Oct13 $1.95
Oct12 $1.86
Oct11 $1.74
Oct10 $1.46
Oct09 $1.27
Oct08 $1.04
Oct07 $1.09
Oct06 $1.03
Oct05 $0.91
Oct04 $0.83
Oct03 $0.67
Oct02 $0.68
Oct01 $0.65
Oct00 $0.60
Oct99 $0.56
Oct98 $0.46
Oct97 $0.36
Oct96 $0.26
Oct95 $0.40

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $2.19
Oct14 $1.96
Oct13 $1.77
Oct12 $1.61
Oct11 $1.43
Oct10 $1.25
Oct09 $1.11
Oct08 $1.02
Oct07 $0.97
Oct06 $0.88
Oct05 $0.79
Oct04 $0.71
Oct03 $0.65
Oct02 $0.62
Oct01 $0.57
Oct00 $0.51
Oct99 $0.44

Recommended Reading:

Other ModernGraham posts about the company

The 10 Best Stocks For Value Investors This Week – 6/20/15
Hormel Foods Corporation Analysis – June 2015 Update $HRL
The Best Companies of the Food Processing Industry – June 2015
18 Companies in the Spotlight This Week – 3/15/15
Hormel Foods Corporation Quarterly Valuation – March 2015 $HRL

Other ModernGraham posts about related companies

Dr Pepper Snapple Group Inc Analysis – September 2015 Update $DPS
Sysco Corporation Analysis – September 2015 Update $SYY
Coca-Cola Enterprises Inc. Analysis – September 2015 Update $CCE
Mead Johnson Nutrition Analysis – August 2015 Update $MJN
McCormick & Company Inc. Analysis – August 2015 Update $MKC
ConAgra Foods Inc. Analysis – August 2015 Update $CAG
Archer Daniels Midland Company Analysis – 2015 Update $ADM
J.M. Smucker Company Analysis – July 2015 Update $SJM
Keurig Green Mountain Inc. Analysis – Initial Coverage $GMCR
Monster Beverage Analysis – July 2015 Update $MNST

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Hormel Foods Corporation Analysis – June 2015 Update $HRL

220px-Hormel_logo.svgBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Most Undervalued Companies for the Defensive Investor – June 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Hormel Foods Corporation (HRL) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Hormel Foods Corporation is primarily engaged in the production of a variety of meat and food products and the marketing of those products throughout the United States and internationally. The Company markets its products through Hormel Foods International Corporation, a wholly owned subsidiary. The Company operates in five segments: Grocery Products, Refrigerated Foods, Jennie-O Turkey Store (JOTS), Specialty Foods, and International & Other. The meat products are sold fresh, frozen, cured, smoked, cooked, and canned. Perishable meat includes fresh meats, refrigerated meal solutions, sausages, hams, wieners, and bacon. The Poultry composed primarily of JOTS products. Shelf-stable includes canned luncheon meats, shelf-stable microwaveable meals, stews, chilies, hash, meat spreads, flour and corn tortillas, salsas, tortilla chips, peanut butter, and other items that do not require refrigeration. The Other category primarily consists of nutritional food products and supplements.

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 5/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – PASS
  3. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – PASS
  6. Moderate PEmg ratio – PEmg is less than 20 – FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 5/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – PASS
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $55.98
MG Value $51.26
MG Opinion Fairly Valued
Value Based on 3% Growth $31.35
Value Based on 0% Growth $18.38
Market Implied Growth Rate 8.70%
Net Current Asset Value (NCAV) $1.92
PEmg 25.89
Current Ratio 2.65
PB Ratio 3.94

Balance Sheet – March 2015

Current Assets $2,302,000,000
Current Liabilities $870,000,000
Total Debt $250,000,000
Total Assets $5,623,000,000
Intangible Assets $1,780,000,000
Total Liabilities $1,782,000,000
Outstanding Shares 270,400,000

Earnings Per Share

2015 (estimate) $2.44
2014 $2.23
2013 $1.95
2012 $1.86
2011 $1.74
2010 $1.46
2009 $1.27
2008 $1.04
2007 $1.09
2006 $1.03
2005 $0.91

Earnings Per Share – ModernGraham

2015 (estimate) $2.16
2014 $1.96
2013 $1.77
2012 $1.61
2011 $1.43
2010 $1.25

Dividend History

Conclusion:

Hormel Foods Corporation qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the high PEmg and PB ratios.  The Enterprising Investor has no initial concerns.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with the evaluation.  As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $1.43 in 2011 to an estimated $2.16 for 2015.  This level of demonstrated earnings growth supports the market’s implied estimate of 8.7% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Hormel Foods Corporation (HRL)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Hormel Foods Corporation Quarterly Valuation – March 2015 $HRL

220px-Hormel_logo.svgBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Most Undervalued Companies for the Defensive Investor – March 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Hormel Foods Corporation (HRL) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Hormel Foods Corporation is primarily engaged in the production of a variety of meat and food products and the marketing of those products throughout the United States and internationally. The Company markets its products through Hormel Foods International Corporation (HFIC), a wholly owned subsidiary. It operates in five segments: Grocery Products, Refrigerated Foods, Jennie-O Turkey Store (JOTS), Specialty Foods, and International & Other. The meat products are sold fresh, frozen, cured, smoked, cooked, and canned. Perishable meat includes fresh meats, refrigerated meal solutions, sausages, hams, wieners, and bacon (excluding JOTS products). The Poultry category is composed primarily of JOTS products. On January 31, 2013, the Company acquired the United States based SKIPPY peanut butter business from Conopco, Inc. In August 2014, Hormel Foods Corporation acquired CytoSport Holdings, Inc.

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 5/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – PASS
  3. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – PASS
  6. Moderate PEmg ratio – PEmg is less than 20 – FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 5/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – PASS
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $55.25
MG Value $53.81
MG Opinion Fairly Valued
Value Based on 3% Growth $31.88
Value Based on 0% Growth $18.69
Market Implied Growth Rate 8.31%
Net Current Asset Value (NCAV) $1.53
PEmg 25.13
Current Ratio 2.40
PB Ratio 4.00

Balance Sheet – January 2015

Current Assets $2,246,000,000
Current Liabilities $937,000,000
Total Debt $250,000,000
Total Assets $5,560,000,000
Intangible Assets $1,778,000,000
Total Liabilities $1,833,000,000
Outstanding Shares 270,100,000

Earnings Per Share

2015 (estimate) $2.55
2014 $2.23
2013 $1.95
2012 $1.86
2011 $1.74
2010 $1.46
2009 $1.27
2008 $1.04
2007 $1.09
2006 $1.03
2005 $0.91

Earnings Per Share – ModernGraham

2015 (estimate) $2.20
2014 $1.96
2013 $1.77
2012 $1.61
2011 $1.43
2010 $1.25

Dividend History

Conclusion:

Hormel Foods Corporation is suitable for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor is concerned by the high PEmg and PB ratios while the Enterprising Investor has no initial concerns.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel very comfortable proceeding with further research and comparing the company to other opportunities.  From a valuation side of things, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $1.43 in 2011 to an estimated $2.20 for 2015.  This level of demonstrated growth supports the market’s implied estimate of 8.31% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value within a margin of safety relative to the price.

Be sure to check out previous ModernGraham valuations of Hormel Foods Corporation (HRL) for greater perspective!

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Hormel Foods Corporation (HRL)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in Hormel Foods Corporation (HRL) or in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Hormel Foods Corporation Quarterly Valuation – December 2014 $HRL

220px-Hormel_logo.svgBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Most Undervalued Companies for the Defensive Investor – November 2014.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Hormel Foods Corporation (HRL) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Hormel Foods Corporation is primarily engaged in the production of a variety of meat and food products and the marketing of those products throughout the United States and internationally. The Company markets its products through Hormel Foods International Corporation (HFIC), a wholly owned subsidiary. It operates in five segments: Grocery Products, Refrigerated Foods, Jennie-O Turkey Store (JOTS), Specialty Foods, and International & Other. The meat products are sold fresh, frozen, cured, smoked, cooked, and canned. Perishable meat includes fresh meats, refrigerated meal solutions, sausages, hams, wieners, and bacon (excluding JOTS products). The Poultry category is composed primarily of JOTS products. On January 31, 2013, the Company acquired the United States based SKIPPY peanut butter business from Conopco, Inc. In August 2014, Hormel Foods Corporation acquired CytoSport Holdings, Inc.

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 5/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – PASS
  3. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – PASS
  6. Moderate PEmg ratio – PEmg is less than 20 – FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 5/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – PASS
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $52.55
MG Value $50.60
MG Opinion Fairly Valued
Value Based on 3% Growth $28.49
Value Based on 0% Growth $16.70
Market Implied Growth Rate 9.12%
Net Current Asset Value (NCAV) $1.07
PEmg 26.75
Current Ratio 2.23
PB Ratio 3.93

Balance Sheet – September 2014

Current Assets $2,133,000,000
Current Liabilities $955,000,000
Total Debt $250,000,000
Total Assets $5,456,000,000
Intangible Assets $1,781,000,000
Total Liabilities $1,844,000,000
Outstanding Shares 269,800,000

Earnings Per Share

2014 $2.23
2013 $1.95
2012 $1.86
2011 $1.74
2010 $1.46
2009 $1.27
2008 $1.04
2007 $1.09
2006 $1.03
2005 $0.91
2004 $0.83

Earnings Per Share – ModernGraham

2014 $1.96
2013 $1.77
2012 $1.61
2011 $1.43
2010 $1.25
2009 $1.12

Dividend History

Conclusion:

Hormel Foods Corporation qualifies for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor is concerned by the high PEmg and PB ratios.  The Enterprising Investor has no initial concerns.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel very comfortable proceeding with further research and comparing the company to other opportunities.  As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $1.25 in 2010 to an estimated $1.96 for 2014.  This level of demonstrated growth supports the market’s implied estimate of 9.12% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value within a margin of safety relative to the price.

Be sure to check out previous ModernGraham valuations of Hormel Foods Corporation (HRL) for greater perspective!

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Hormel Foods Corporation (HRL)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in Hormel Foods Corporation (HRL) or in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Hormel Foods Corporation Quarterly Stock Valuation – August 2014 $HRL

220px-Hormel_logo.svgBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Undervalued Companies for the Enterprising Investor.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Hormel Foods Corporation (HRL) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Hormel Foods Corporation is primarily engaged in the production of a variety of meat and food products and the marketing of those products throughout the United States and internationally. The Company markets its products through Hormel Foods International Corporation (HFIC), a wholly owned subsidiary. It operates in five segments: Grocery Products, Refrigerated Foods, Jennie-O Turkey Store (JOTS), Specialty Foods, and International & Other. The meat products are sold fresh, frozen, cured, smoked, cooked, and canned. Perishable meat includes fresh meats, refrigerated meal solutions, sausages, hams, wieners, and bacon (excluding JOTS products). The Poultry category is composed primarily of JOTS products. On January 31, 2013, the Company acquired the United States based SKIPPY peanut butter business from Conopco, Inc. In August 2014, Hormel Foods Corporation acquired CytoSport Holdings, Inc.
HRL Chart

HRL data by YCharts

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 5/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – PASS
  3. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – PASS
  6. Moderate PEmg ratio – PEmg is less than 20 – FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 5/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – PASS
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $50.36
MG Value $49.87
MG Opinion Fairly Valued
Value Based on 3% Growth $28.34
Value Based on 0% Growth $16.61
Market Implied Growth Rate 8.63%
Net Current Asset Value (NCAV) $2.25
PEmg 25.76
Current Ratio 2.89
PB Ratio 3.79

Balance Sheet – 4/27/2014

Current Assets $2,172,600,000
Current Liabilities $752,000,000
Total Debt $250,000,000
Total Assets $5,085,800,000
Intangible Assets $1,338,300,000
Total Liabilities $1,579,900,000
Outstanding Shares 263,930,000

Earnings Per Share

2014 (estimate) $2.20
2013 $1.95
2012 $1.86
2011 $1.74
2010 $1.46
2009 $1.27
2008 $1.04
2007 $1.09
2006 $1.03
2005 $0.91
2004 $0.83

Earnings Per Share – ModernGraham

2014 (estimate) $1.95
2013 $1.77
2012 $1.61
2011 $1.43
2010 $1.25
2009 $1.12

Dividend History
HRL Dividend Chart

HRL Dividend data by YCharts

Conclusion:

Hormel Foods is not suitable for the Defensive Investor but does satisfy for the Enterprising Investor.  The Defensive Investor has concerns with the high PEmg and PB ratios, while the Enterprising Investor has no initial concerns.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with research into the company and comparing it to other opportunities.  From a valuation perspective, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $1.25 in 2010 to an estimated $1.95 for 2014.  This level of demonstrated growth supports the market’s implied estimate of 8.63% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value within a margin of safety relative to the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Hormel Foods Corporation (HRL)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in Hormel Foods Corporation (HRL) or in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Back To Top