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McCormick & Co Valuation – February 2019 $MKC

Company Profile (excerpt from Reuters): McCormick & Company, Incorporated, incorporated on November 30, 1915, is engaged in manufacturing, marketing and distributing spices, seasoning mixes, condiments and other flavorful products to the food industry, including retailers, food manufacturers and foodservice businesses. The Company’s segments include consumer and industrial. The Company is involved in the manufacturing and sales of flavorful products. The Company’s sales, distribution and production facilities are located in North America, Europe and China. Its additional facilities are based in Australia, Mexico, India, Singapore, Central America, Thailand and South Africa.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of MKC – February 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 $17,588,659,997 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.74 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 85.31% Pass
6. Moderate PEmg Ratio PEmg < 20 26.45 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.60 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 0.74 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -7.77 Fail
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 $5.04
MG Growth Estimate 9.37%
MG Value $137.16
Opinion Fairly Valued
MG Grade C
MG Value based on 3% Growth $73.03
MG Value based on 0% Growth $42.81
Market Implied Growth Rate 8.97%
Current Price $133.20
% of Intrinsic Value 97.12%

MCCORMICK & CO /SH NV does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $3.1 in 2015 to an estimated $5.04 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 8.97% 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 MCCORMICK & CO /SH NV revealed the company was trading above its Graham Number of $52.98. The company pays a dividend of $2.08 per share, for a yield of 1.6% Its PEmg (price over earnings per share – ModernGraham) was 26.45, which was below the industry average of 26.71, 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 $-41.81.

MCCORMICK & CO /SH NV receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$41.81
Graham Number $52.98
PEmg 26.45
Current Ratio 0.74
PB Ratio 5.60
Current Dividend $2.08
Dividend Yield 1.56%
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 11/1/2018
Total Current Assets $1,479,900,000
Total Current Liabilities $2,001,700,000
Long-Term Debt $4,052,900,000
Total Assets $10,256,400,000
Intangible Assets $7,401,200,000
Total Liabilities $7,074,200,000
Shares Outstanding (Diluted Average) 133,800,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.18
Nov2018 $7.00
Nov2017 $3.72
Nov2016 $3.69
Nov2015 $3.11
Nov2014 $3.34
Nov2013 $2.91
Nov2012 $3.04
Nov2011 $2.79
Nov2010 $2.75
Nov2009 $2.27
Nov2008 $1.94
Nov2007 $1.73
Nov2006 $1.50
Nov2005 $1.56
Nov2004 $1.52
Nov2003 $1.48
Nov2002 $1.26
Nov2001 $0.53
Nov2000 $0.99
Nov1999 $0.72

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.04
Nov2018 $4.70
Nov2017 $3.49
Nov2016 $3.32
Nov2015 $3.10
Nov2014 $3.05
Nov2013 $2.86
Nov2012 $2.74
Nov2011 $2.49
Nov2010 $2.24
Nov2009 $1.92
Nov2008 $1.72
Nov2007 $1.59
Nov2006 $1.50
Nov2005 $1.42
Nov2004 $1.29
Nov2003 $1.11

Recommended Reading:

Other ModernGraham posts about the company

McCormick & Co Inc Valuation – May 2018 $MKC
McCormick & Company Valuation – January 2017 $MKC
McCormick & Company Inc. Analysis – August 2015 Update $MKC
20 Companies in the Spotlight This Week – 8/16/14
McCormick & Company Inc. Annual Valuation – 2014 $MKC

Other ModernGraham posts about related companies

Monster Beverage Corp Valuation – February 2019 $MNST
Campbell Soup Co Valuation – January 2019 $CPB
Kellogg Co Valuation – January 2019 $K
PepsiCo Inc Valuation – January 2019 $PEP
The Hershey Co Valuation – January 2019 $HSY
Coca-Cola Co Valuation – November 2018 $KO
Calavo Growers Inc Valuation – October 2018 $CVGW
Lancaster Colony Corp Valuation – August 2018 $LANC
SpartanNash Co Valuation – August 2018 $SPTN
Core-Mark Holding Co Inc Valuation – August 2018 $CORE

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.

McCormick & Co Inc Valuation – May 2018 $MKC

Company Profile (excerpt from Reuters): McCormick & Company, Incorporated, incorporated on November 30, 1915, is engaged in manufacturing, marketing and distributing spices, seasoning mixes, condiments and other flavorful products to the food industry, including retailers, food manufacturers and foodservice businesses. The Company’s segments include consumer and industrial. The Company is involved in the manufacturing and sales of flavorful products. The Company’s sales, distribution and production facilities are located in North America, Europe and China. Its additional facilities are based in Australia, Mexico, India, Singapore, Central America, Thailand and South Africa.

MKC Chart

MKC data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of MKC – May 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 $13,340,997,112 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.86 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 56.59% Pass
6. Moderate PEmg Ratio PEmg < 20 25.57 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.41 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 0.86 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -16.49 Fail
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 $3.97
MG Growth Estimate 4.53%
MG Value $69.76
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $57.62
MG Value based on 0% Growth $33.78
Market Implied Growth Rate 8.54%
Current Price $101.62
% of Intrinsic Value 145.67%

McCormick & Company, Incorporated does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $3.05 in 2014 to an estimated $3.97 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 8.54% 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 McCormick & Company, Incorporated revealed the company was trading above its Graham Number of $46.04. The company pays a dividend of $1.88 per share, for a yield of 1.9% Its PEmg (price over earnings per share – ModernGraham) was 25.57, which was below the industry average of 31.56, 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 $-42.87.

McCormick & Company, Incorporated receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$42.87
Graham Number $46.04
PEmg 25.57
Current Ratio 0.86
PB Ratio 4.41
Current Dividend $1.88
Dividend Yield 1.85%
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 2/1/2018
Total Current Assets $1,606,000,000
Total Current Liabilities $1,871,500,000
Long-Term Debt $4,378,600,000
Total Assets $10,363,000,000
Intangible Assets $7,533,100,000
Total Liabilities $7,302,800,000
Shares Outstanding (Diluted Average) 132,900,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.82
Nov2017 $3.72
Nov2016 $3.69
Nov2015 $3.11
Nov2014 $3.34
Nov2013 $2.91
Nov2012 $3.04
Nov2011 $2.79
Nov2010 $2.75
Nov2009 $2.27
Nov2008 $1.94
Nov2007 $1.73
Nov2006 $1.50
Nov2005 $1.56
Nov2004 $1.52
Nov2003 $1.48
Nov2002 $1.26
Nov2001 $1.05
Nov2000 $0.99
Nov1999 $0.72
Nov1998 $0.71

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.97
Nov2017 $3.49
Nov2016 $3.32
Nov2015 $3.10
Nov2014 $3.05
Nov2013 $2.86
Nov2012 $2.74
Nov2011 $2.49
Nov2010 $2.24
Nov2009 $1.92
Nov2008 $1.72
Nov2007 $1.59
Nov2006 $1.50
Nov2005 $1.46
Nov2004 $1.36
Nov2003 $1.22
Nov2002 $1.04

Recommended Reading:

Other ModernGraham posts about the company

McCormick & Company Valuation – January 2017 $MKC
McCormick & Company Inc. Analysis – August 2015 Update $MKC
20 Companies in the Spotlight This Week – 8/16/14
McCormick & Company Inc. Annual Valuation – 2014 $MKC

Other ModernGraham posts about related companies

Monster Beverage Corp Valuation – April 2018 $MNST
Campbell Soup Co Valuation – March 2018 $CPB
Kellogg Company Valuation – March 2018 $K
Hershey Co Valuation – March 2018 $HSY
PepsiCo Inc Valuation – March 2018 $PEP
The Coca-Cola Co Valuation – February 2018 $KO
Campbell Soup Company Valuation – September 2017 $CPB
Post Holdings Inc Valuation – Initial Coverage $POST
Dean Foods Co Valuation – Initial Coverage $DF
George Weston Limited Valuation – Initial Coverage $TSE:WN

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.

McCormick & Company Valuation – January 2017 $MKC

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 – December 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 McCormick & Company (MKC) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): McCormick & Company, Incorporated manufactures, markets and distributes spices, seasoning mixes, condiments and other flavorful products to the food industry, including retailers, food manufacturers and foodservice businesses. The Company operates in two segments: consumer and industrial. Its brands in the Americas include McCormick, Lawry’s, Stubb’s, Club House, Zatarain’s, Thai Kitchen and Simply Asia. In Europe and the Middle East and Africa (EMEA), the Company’s brands include the Ducros, Schwartz, Kamis, Drogheria & Alimentari, and a line of Vahine brand dessert items. In the Asia/Pacific region, it markets products under the McCormick and DaQiao brands in China. In Australia, it markets its spices and seasonings under the McCormick brand and its dessert products under the Aeroplane brand. In India, its joint venture trades under the Kohinoor brand. The industrial segment sells to food manufacturers and the foodservice industry both directly and indirectly through distributors.

MKC Chart

MKC data by YCharts

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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.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of MKC – January 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 $11,763,745,082 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.09 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 71.21% Pass
6. Moderate PEmg Ratio PEmg < 20 28.04 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 6.79 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 1.09 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 8.34 Fail
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 $3.33
MG Growth Estimate 3.22%
MG Value $49.74
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $48.26
MG Value based on 0% Growth $28.29
Market Implied Growth Rate 9.77%
Current Price $93.33
% of Intrinsic Value 187.62%

McCormick & Company, Incorporated does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $2.74 in 2012 to an estimated $3.33 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 9.77% 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 McCormick & Company, Incorporated revealed the company was trading above its Graham Number of $34.16. The company pays a dividend of $1.69 per share, for a yield of 1.8% Its PEmg (price over earnings per share – ModernGraham) was 28.04, which was above the industry average of 24.74. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-11.66.

McCormick & Company, Incorporated scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$11.66
Graham Number $34.16
PEmg 28.04
Current Ratio 1.09
PB Ratio 6.79
Current Dividend $1.69
Dividend Yield 1.81%
Number of Consecutive Years of Dividend Growth 20

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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 8/1/2016
Total Current Assets $1,468,000,000
Total Current Liabilities $1,341,200,000
Long-Term Debt $1,057,900,000
Total Assets $4,716,500,000
Intangible Assets $2,246,900,000
Total Liabilities $2,959,100,000
Shares Outstanding (Diluted Average) 127,900,000

Earnings Per Share History

Next Fiscal Year Estimate $3.72
Nov2015 $3.11
Nov2014 $3.34
Nov2013 $2.91
Nov2012 $3.04
Nov2011 $2.79
Nov2010 $2.75
Nov2009 $2.27
Nov2008 $1.94
Nov2007 $1.73
Nov2006 $1.50
Nov2005 $1.56
Nov2004 $1.52
Nov2003 $1.48
Nov2002 $1.26
Nov2001 $1.05
Nov2000 $0.99
Nov1999 $0.72
Nov1998 $0.71
Nov1997 $0.65
Nov1996 $0.26

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $3.33
Nov2015 $3.10
Nov2014 $3.05
Nov2013 $2.86
Nov2012 $2.74
Nov2011 $2.49
Nov2010 $2.24
Nov2009 $1.92
Nov2008 $1.72
Nov2007 $1.59
Nov2006 $1.50
Nov2005 $1.46
Nov2004 $1.36
Nov2003 $1.22
Nov2002 $1.04
Nov2001 $0.89
Nov2000 $0.77

Recommended Reading:

Other ModernGraham posts about the company

McCormick & Company Inc. Analysis – August 2015 Update $MKC
20 Companies in the Spotlight This Week – 8/16/14
McCormick & Company Inc. Annual Valuation – 2014 $MKC

Other ModernGraham posts about related companies

Seneca Foods Corp Valuation – Initial Coverage $SENEA
Ingredion Inc Valuation – Initial Coverage $INGR
Saputo Inc Valuation – Initial Coverage $SAP
Best Stocks to Invest In: the Food Processing Industry – August 2016
B&G Foods Inc Valuation – August 2016 $BGS
Tyson Foods Inc Valuation – August 2016 $TSN
Mondelez International Inc Valuation – August 2016 $MDLZ
Hormel Foods Corp Valuation – August 2016 $HRL
J.M. Smucker Co Valuation – August 2016 $SJM
General Mills Inc Valuation – August 2016 $GIS

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.

McCormick & Company Inc. Analysis – August 2015 Update $MKC

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 5 Most Undervalued Companies for the Defensive Investor – July 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 McCormick & Company Inc. (MKC) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): McCormick & Company, Incorporated manufactures, markets and distributes spices, seasoning mixes, condiments and other flavorful products to the food industry. The Company has two business segments: consumer and industrial. Under the Consumer segment, its brands in the Americas include McCormick, Lawry’s and Club House. It also markets ethnic brands, such as Zatarain’s, Thai Kitchen and Simply Asia. In Europe, the Middle East and Africa (EMEA), its brands include the Ducros, Schwartz and Kamis brands of spices, herbs and seasonings, and a line of Vahine brand dessert items. In the Asia/Pacific region, it markets products under the McCormick and DaQiao brands. In Australia, it markets products under the McCormick brand. In India, its majority-owned joint venture owns and trades under the Kohinoor brand. In the industrial business segment, it offers seasoning blends, spices and herbs, condiments, coating systems and compound flavors to food manufacturers and foodservice customers.

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To read the rest 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.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of MKC

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 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 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 Pass
6. Moderate PEmg Ratio PEmg < 20 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 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 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 Fail
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 3.13
MG Growth Estimate 3.87%
MG Value $50.89
Opinion Overvalued
MG Value based on 3% Growth $45.44
MG Value based on 0% Growth $26.64
Market Implied Growth Rate 9.34%
Current Price $85.20
% of Intrinsic Value 167.41%

McCormick & Company Inc. is not suitable for the more conservative Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned with the low current ratio, and high PEmg and PB ratios.  The Enterprising Investor is concerned by the level of debt relative to the current assets.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities or proceed with a cautious speculative attitude.

As for a valuation, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $2.49 in 2011 to an estimated $3.13 for 2015.  This level of demonstrated earnings growth does not support the market’s implied estimate of 9.34% 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 McCormick & Company Inc. (MKC)?  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

MKC Charts - August 2015

Net Current Asset Value (NCAV) -$10.11
PEmg 27.19
Current Ratio 1.02
PB Ratio 6.41
Dividend Yield 1.81%
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

Total Current Assets $1,358,900,000
Total Current Liabilities $1,338,800,000
Long-Term Debt $807,900,000
Total Assets $4,378,400,000
Intangible Assets $2,084,400,000
Total Liabilities $2,663,100,000
Outstanding Shares 129,000,000

Earnings Per Share History

Next Fiscal Year Estimate $3.21
Nov14 $3.34
Nov13 $2.91
Nov12 $3.04
Nov11 $2.79
Nov10 $2.75
Nov09 $2.27
Nov08 $1.94
Nov07 $1.73
Nov06 $1.50
Nov05 $1.56
Nov04 $1.52
Nov03 $1.48
Nov02 $1.26
Nov01 $1.05
Nov00 $0.99
Nov99 $0.72
Nov98 $0.71
Nov97 $0.65
Nov96 $0.26
Nov95 $0.60

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $3.13
Nov14 $3.05
Nov13 $2.86
Nov12 $2.74
Nov11 $2.49
Nov10 $2.24
Nov09 $1.92
Nov08 $1.72
Nov07 $1.59
Nov06 $1.50
Nov05 $1.46
Nov04 $1.36
Nov03 $1.22
Nov02 $1.04
Nov01 $0.89
Nov00 $0.77
Nov99 $0.63

Recommended Reading:

Other ModernGraham posts about the company

20 Companies in the Spotlight This Week – 8/16/14
McCormick & Company Inc. Annual Valuation – 2014 $MKC

Other ModernGraham posts about related companies

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
Tyson Foods Analysis – July 2015 Update $TSN
Mondelez International Inc. Analysis – 2015 Update $MDLZ
Hormel Foods Corporation Analysis – June 2015 Update $HRL
The Best Companies of the Food Processing Industry – June 2015
Mead Johnson Nutrition Company Quarterly Valuation – May 2015 $MJN
Sysco Corporation Quarterly Valuation – May 2015 $SYY

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.  This is not investment advice and all readers should speak with a registered investment adviser prior to making any investment decision.  ModernGraham is not affiliated with the company in any manner.

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

McCormick & Company Inc. Annual Valuation – 2014 $MKC

145px-McCormick.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 Defensive 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 McCormick & Company Inc. (MKC) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): McCormick & Company, Incorporated manufactures, markets and distributes spices, seasoning mixes, condiments and other flavorful products to the entire food industry, retail outlets, food manufacturers and foodservice businesses. The Company operates in two business segments: consumer and industrial. The Company’s sales, distribution and production facilities are located in North America and Europe. Additional facilities are based in China, Australia, Mexico, India, Singapore, Central America, Thailand and South Africa. The Company operates in two business segments: consumer and industrial. Its products are sold directly to customers and also through brokers, wholesalers and distributors. In May 2013, the Company has completed its purchase of China’s Wuhan Asia-Pacific Condiments Co.
MKC Chart

MKC data by YCharts

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 4/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – FAIL
  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 = 3/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – FAIL
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – FAIL
  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 $68.86
MG Value $57.04
MG Opinion Overvalued
Value Based on 3% Growth $42.07
Value Based on 0% Growth $24.66
Market Implied Growth Rate 7.62%
Net Current Asset Value (NCAV) -$8.65
PEmg 23.73
Current Ratio 1.32
PB Ratio 4.56

Balance Sheet – 5/31/2014

Current Assets $1,324,700,000
Current Liabilities $1,002,800,000
Total Debt $1,016,800,000
Total Assets $4,409,300,000
Intangible Assets $2,139,000,000
Total Liabilities $2,447,100,000
Outstanding Shares 129,810,000

Earnings Per Share

2014 (estimate) $3.24
2013 $2.73
2012 $2.88
2011 $2.60
2010 $2.56
2009 $2.14
2008 $1.80
2007 $1.73
2006 $1.50
2005 $1.56
2004 $1.52

Earnings Per Share – ModernGraham

2014 (estimate) $2.90
2013 $2.68
2012 $2.57
2011 $2.33
2010 $2.11
2009 $1.84

Dividend History
MKC Dividend Chart

MKC Dividend data by YCharts

Conclusion:

McCormick & Company does not qualify for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor has concerns about the low current ratio, and the high PEmg and PB ratios.  The Enterprising Investor is concerned by the level of debt relative to the net current assets.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities.  From a valuation side of things, the company appears overvalued after growing its EPSmg (normalized earnings) from $2.11 in 2010 to only an estimated $2.90 for 2014.  This low level of demonstrated growth in earnings does not support the market’s implied estimate of 7.62% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return 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 McCormick & Company (MKC)?  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 McCormick & Company (MKC) 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.

Coca-Cola Co Valuation – April 2019 #KO

Company Profile (excerpt from Reuters): The Coca-Cola Company, incorporated on September 5, 1919, is a beverage company. The Company owns or licenses and markets non-alcoholic beverage brands, primarily sparkling beverages and a range of still beverages, such as waters, flavored waters and enhanced waters, juices and juice drinks, ready-to-drink teas and coffees, sports drinks, dairy and energy drinks. The Company’s segments include Europe, Middle East and Africa; Latin America; North America; Asia Pacific; Bottling Investments, and Corporate. The Company owns and markets a range of non-alcoholic sparkling beverage brands, including Coca-Cola, Diet Coke, Fanta and Sprite. As of December 31, 2016, the Company owned or licensed and marketed over 500 non-alcoholic beverage brands. The Company markets, manufactures and sells beverage concentrates, which are referred to as beverage bases, and syrups, including fountain syrups (concentrate business or concentrate operations), and finished sparkling and still beverages (finished product business or finished product operations). The Company makes its beverage products available to consumers across the world through its network of Company-owned or -controlled bottling and distribution operations, as well as bottling partners, distributors, wholesalers and retailers.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of KO – April 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 $198,666,736,888 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.05 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 -39.21% Fail
6. Moderate PEmg Ratio PEmg < 20 31.87 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 10.50 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 1.05 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 17.98 Fail
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 Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.46
MG Growth Estimate -2.50%
MG Value $5.11
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $21.14
MG Value based on 0% Growth $12.39
Market Implied Growth Rate 11.69%
Current Price $46.47
% of Intrinsic Value 909.65%

The Coca-Cola Co does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $1.75 in 2015 to an estimated $1.46 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 11.69% 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 The Coca-Cola Co revealed the company was trading above its Graham Number of $13.61. The company pays a dividend of $1.56 per share, for a yield of 3.4%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 31.87, which was above the industry average of 27.84. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-7.79.

The Coca-Cola Co receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$7.79
Graham Number $13.61
PEmg 31.87
Current Ratio 1.05
PB Ratio 10.50
Current Dividend $1.56
Dividend Yield 3.36%
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 12/1/2018
Total Current Assets $30,634,000,000
Total Current Liabilities $29,223,000,000
Long-Term Debt $25,364,000,000
Total Assets $83,216,000,000
Intangible Assets $17,270,000,000
Total Liabilities $64,158,000,000
Shares Outstanding (Diluted Average) 4,305,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.07
Dec2018 $1.50
Dec2017 $0.29
Dec2016 $1.49
Dec2015 $1.67
Dec2014 $1.60
Dec2013 $1.90
Dec2012 $1.97
Dec2011 $1.85
Dec2010 $2.53
Dec2009 $1.47
Dec2008 $1.25
Dec2007 $1.29
Dec2006 $1.08
Dec2005 $1.02
Dec2004 $1.00
Dec2003 $0.89
Dec2002 $0.62
Dec2001 $0.80
Dec2000 $0.44
Dec1999 $0.49

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.46
Dec2018 $1.20
Dec2017 $1.17
Dec2016 $1.65
Dec2015 $1.75
Dec2014 $1.85
Dec2013 $1.96
Dec2012 $1.93
Dec2011 $1.84
Dec2010 $1.73
Dec2009 $1.29
Dec2008 $1.18
Dec2007 $1.11
Dec2006 $0.99
Dec2005 $0.92
Dec2004 $0.83
Dec2003 $0.71

Recommended Reading:

Other ModernGraham posts about the company

5 Overvalued Dow Components – January 2019
Coca-Cola Co Valuation – November 2018 $KO
10 Most Overvalued Stocks of the S&P 500 – July 2018
5 Overvalued Dow Components – June 2018
5 Overvalued Dow Components – February 2018

Other ModernGraham posts about related companies

Tyson Foods Inc Valuation – March 2019 #TSN
Mondelez International Inc Valuation – March 2019 #MDLZ
Hormel Foods Corp Valuation – March 2019 #HRL
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

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.

Tyson Foods Inc Valuation – March 2019 #TSN

Company Profile (excerpt from Reuters): Tyson Foods, Inc., incorporated on January 31, 1986, is a food company, which is engaged in offering chicken, beef and pork, as well as prepared foods. The Company offers food products under Tyson, Jimmy Dean, Hillshire Farm, Sara Lee, Ball Park, Wright, Aidells and State Fair brands. The Company operates through four segments: Chicken, Beef, Pork and Prepared Foods. It operates a vertically integrated chicken production process, which consists of breeding stock, contract growers, feed production, processing, further-processing, marketing and transportation of chicken and related allied products, including animal and pet food ingredients. Through its subsidiary, Cobb-Vantress, Inc. (Cobb), the Company is engaged in supplying poultry breeding stock across the world. It produces a range of fresh, frozen and refrigerated food products.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of TSN – 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 $20,499,693,600 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.85 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 225.35% Pass
6. Moderate PEmg Ratio PEmg < 20 12.02 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.92 Pass
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 0.85 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -7.15 Fail
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 $5.78
MG Growth Estimate 15.00%
MG Value $222.38
Opinion Undervalued
MG Grade B
MG Value based on 3% Growth $83.75
MG Value based on 0% Growth $49.10
Market Implied Growth Rate 1.76%
Current Price $69.43
% of Intrinsic Value 31.22%

Tyson Foods, Inc. qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the low current ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.38 in 2015 to an estimated $5.78 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.76% 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 above the price.

At the time of valuation, further research into Tyson Foods, Inc. revealed the company was trading above its Graham Number of $65.79. The company pays a dividend of $1.13 per share, for a yield of 1.6% Its PEmg (price over earnings per share – ModernGraham) was 12.02, 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 $-34.9.

Tyson Foods, Inc. performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$34.90
Graham Number $65.79
PEmg 12.02
Current Ratio 0.85
PB Ratio 1.92
Current Dividend $1.13
Dividend Yield 1.62%
Number of Consecutive Years of Dividend Growth 6

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 12/1/2018
Total Current Assets $6,301,000,000
Total Current Liabilities $7,430,000,000
Long-Term Debt $8,075,000,000
Total Assets $32,335,000,000
Intangible Assets $18,255,000,000
Total Liabilities $19,076,000,000
Shares Outstanding (Diluted Average) 366,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.50
Sep2018 $8.19
Sep2017 $4.79
Sep2016 $4.53
Sep2015 $2.95
Sep2014 $2.37
Sep2013 $2.12
Sep2012 $1.58
Sep2011 $1.97
Sep2010 $2.13
Sep2009 -$1.49
Sep2008 $0.24
Sep2007 $0.75
Sep2006 -$0.58
Sep2005 $1.04
Sep2004 $1.13
Sep2003 $0.96
Sep2002 $1.08
Sep2001 $0.40
Sep2000 $0.67
Sep1999 $1.00

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.78
Sep2018 $5.46
Sep2017 $3.85
Sep2016 $3.16
Sep2015 $2.38
Sep2014 $2.08
Sep2013 $1.71
Sep2012 $1.30
Sep2011 $1.01
Sep2010 $0.42
Sep2009 -$0.29
Sep2008 $0.38
Sep2007 $0.52
Sep2006 $0.51
Sep2005 $1.01
Sep2004 $0.95
Sep2003 $0.84

Recommended Reading:

Other ModernGraham posts about the company

5 Undervalued Companies for Value Investors with a Low Beta – January 2019
10 Undervalued Stocks for the Enterprising Investor – January 2019
Most Undervalued Stocks of the S&P 500 – August 2018
10 Undervalued Stocks for the Enterprising Investor – August 2018
5 Companies for Enterprising Investors Near 52 Week Lows – July 2018

Other ModernGraham posts about related companies

Mondelez International Inc Valuation – March 2019 #MDLZ
Hormel Foods Corp Valuation – March 2019 #HRL
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

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.

Mondelez International Inc Valuation – March 2019 #MDLZ

Company Profile (excerpt from Reuters): Mondelez International, Inc., incorporated on January 10, 2005, is a snack company. The Company manufactures and markets snack food and beverage products for consumers. The Company operates through four segments: Latin America, Asia, Middle East, and Africa (AMEA), Europe and North America. As of December 31, 2016, its brands spanned five product categories, including Biscuits (including cookies, crackers and salted snacks); Chocolate; Gum and candy; Beverages (including coffee and powdered beverages), and Cheese and grocery. The Company’s portfolio includes various snack brands, including Nabisco, Oreo, LU and belVita biscuits; Cadbury, Milka, Cadbury Dairy Milk and Toblerone chocolate; Trident gum; Halls candy, and Tang powdered beverages.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of MDLZ – 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 $71,479,143,112 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.45 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 7.34% Fail
6. Moderate PEmg Ratio PEmg < 20 22.20 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.83 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 0.45 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -1.37 Fail
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 Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.23
MG Growth Estimate -2.26%
MG Value $8.89
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $32.33
MG Value based on 0% Growth $18.95
Market Implied Growth Rate 6.85%
Current Price $49.50
% of Intrinsic Value 556.80%

MONDELEZ INTERNATIONAL INC Common Stock does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $2.62 in 2015 to an estimated $2.23 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 6.85% 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 MONDELEZ INTERNATIONAL INC Common Stock revealed the company was trading above its Graham Number of $31.21. The company pays a dividend of $0.96 per share, for a yield of 1.9% Its PEmg (price over earnings per share – ModernGraham) was 22.2, 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 $-19.99.

MONDELEZ INTERNATIONAL INC Common Stock scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$19.99
Graham Number $31.21
PEmg 22.20
Current Ratio 0.45
PB Ratio 2.83
Current Dividend $0.96
Dividend Yield 1.94%
Number of Consecutive Years of Dividend Growth 5

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 12/1/2018
Total Current Assets $7,604,000,000
Total Current Liabilities $16,737,000,000
Long-Term Debt $12,532,000,000
Total Assets $62,729,000,000
Intangible Assets $38,727,000,000
Total Liabilities $37,016,000,000
Shares Outstanding (Diluted Average) 1,471,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.45
Dec2018 $2.28
Dec2017 $1.85
Dec2016 $1.04
Dec2015 $4.44
Dec2014 $1.28
Dec2013 $2.19
Dec2012 $1.73
Dec2011 $2.01
Dec2010 $2.39
Dec2009 $2.03
Dec2008 $1.90
Dec2007 $1.62
Dec2006 $1.85
Dec2005 $1.55
Dec2004 $1.55
Dec2003 $2.01
Dec2002 $1.96
Dec2001 $1.17
Dec2000 $1.38
Dec1999 $1.20

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.23
Dec2018 $2.14
Dec2017 $2.10
Dec2016 $2.19
Dec2015 $2.62
Dec2014 $1.78
Dec2013 $2.05
Dec2012 $1.99
Dec2011 $2.07
Dec2010 $2.06
Dec2009 $1.86
Dec2008 $1.75
Dec2007 $1.68
Dec2006 $1.74
Dec2005 $1.67
Dec2004 $1.69
Dec2003 $1.69

Recommended Reading:

Other ModernGraham posts about the company

Mondelez International Inc Valuation – June 2018 $MDLZ
Mondelez International Inc Valuation – March 2017 $MDLZ
Mondelez International Inc Valuation – August 2016 $MDLZ
5 Speculative and Overvalued Companies to Avoid – July 2015
Mondelez International Inc. Analysis – 2015 Update $MDLZ

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 – 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
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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.

JM Smucker Co Valuation – March 2019 #SJM

Company Profile (excerpt from Reuters): The J. M. Smucker Company, incorporated on October 26, 1921, is a manufacturer and marketer of branded food and beverage products and pet food and pet snacks in North America. The Company’s segments include U.S. Retail Coffee, U.S. Retail Consumer Foods, U.S. Retail Pet Foods, and International and Foodservice. The Company’s U.S. retail market segments consist of the sale of branded food products to consumers through retail outlets in North America. In the U.S. retail market segments, the Company’s products are sold to food retailers, food wholesalers, drug stores, club stores, mass merchandisers, discount and dollar stores, military commissaries, natural foods stores and distributors, and pet specialty stores. In International and Foodservice, the Company’s products are distributed domestically and in foreign countries through retail channels and foodservice distributors and operators, such as restaurants, lodging, schools and universities, healthcare operators.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SJM – 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 $11,657,929,787 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.95 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 84.50% Pass
6. Moderate PEmg Ratio PEmg < 20 14.51 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.45 Pass
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 0.95 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -58.60 Fail
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 $7.06
MG Growth Estimate 9.27%
MG Value $191.00
Opinion Undervalued
MG Grade B+
MG Value based on 3% Growth $102.44
MG Value based on 0% Growth $60.05
Market Implied Growth Rate 3.00%
Current Price $102.49
% of Intrinsic Value 53.66%

J M Smucker Co qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the low current ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $4.37 in 2015 to an estimated $7.06 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3% 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 above the price.

At the time of valuation, further research into J M Smucker Co revealed the company was trading above its Graham Number of $94.73. The company pays a dividend of $3.09 per share, for a yield of 3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 14.51, 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 $-63.43.

J M Smucker Co performs fairly well in the ModernGraham grading system, scoring a B+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$63.43
Graham Number $94.73
PEmg 14.51
Current Ratio 0.95
PB Ratio 1.45
Current Dividend $3.09
Dividend Yield 3.01%
Number of Consecutive Years of Dividend Growth 17

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 $1,726,200,000
Total Current Liabilities $1,816,400,000
Long-Term Debt $5,285,800,000
Total Assets $16,927,600,000
Intangible Assets $13,197,900,000
Total Liabilities $8,906,000,000
Shares Outstanding (Diluted Average) 113,200,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.74
Apr2018 $11.78
Apr2017 $5.10
Apr2016 $5.76
Apr2015 $3.33
Apr2014 $5.42
Apr2013 $5.00
Apr2012 $4.06
Apr2011 $4.05
Apr2010 $4.15
Apr2009 $3.11
Apr2008 $3.00
Apr2007 $2.76
Apr2006 $2.45
Apr2005 $2.24
Apr2004 $2.24
Apr2003 $2.02
Apr2002 $1.31
Apr2001 $1.12
Apr2000 $0.97
Apr1999 $1.31

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $7.06
Apr2018 $7.24
Apr2017 $4.96
Apr2016 $4.83
Apr2015 $4.37
Apr2014 $4.77
Apr2013 $4.32
Apr2012 $3.88
Apr2011 $3.66
Apr2010 $3.34
Apr2009 $2.86
Apr2008 $2.67
Apr2007 $2.45
Apr2006 $2.22
Apr2005 $2.00
Apr2004 $1.76
Apr2003 $1.46

Recommended Reading:

Other ModernGraham posts about the company

5 Undervalued Companies for Value Investors with a Low Beta – May 2018
J M Smucker Co Valuation – May 2018 $SJM
J M Smucker Co Valuation – February 2017 $SJM
J.M. Smucker Co Valuation – August 2016 $SJM
J.M. Smucker Co Valuation – February 2016 $SJM

Other ModernGraham posts about related companies

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
Kellogg Co Valuation – January 2019 $K

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.

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