Food Processing Stocks

Mondelez International Inc Valuation – August 2016 $MDLZ

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 Mondelez International Inc (MDLZ) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Mondelez International, Inc. is a snack company. The Company manufactures and markets snack food and beverage products for consumers in approximately 165 countries around the world. The Company operates through five segments: Latin America; Asia Pacific; Eastern Europe, Middle East, and Africa (EEMEA); Europe, and North America. Its portfolio includes over seven brands, including Nabisco, Oreo and LU biscuits; Cadbury, Cadbury Dairy Milk and Milka chocolates, and Trident gum, as well as over 50 brands. The Company’s brands span five product categories: biscuits (including cookies, crackers and salted snacks); chocolate; gum and candy; beverages (including coffee and powdered beverages), and cheese and grocery. The Company’s other brands include Oreo, Chips Ahoy!, Ritz, TUC/Club Social and belVita biscuits; Cadbury Dairy Milk, Milka and Lacta chocolate; Trident gum; Hall’s candy, and Tang powdered beverages.

MDLZ Chart

MDLZ data by YCharts

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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 MDLZ – 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 $66,826,088,147 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.69 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 34.23% Pass
6. Moderate PEmg Ratio PEmg < 20 17.82 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.47 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 0.69 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -3.38 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

MDLZ value chart August 2016

EPSmg $2.42
MG Growth Estimate 3.34%
MG Value $36.78
Opinion Overvalued
MG Grade C+
MG Value based on 3% Growth $35.13
MG Value based on 0% Growth $20.59
Market Implied Growth Rate 4.66%
Current Price $43.17
% of Intrinsic Value 117.37%

Mondelez International 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 Overvalued after growing its EPSmg (normalized earnings) from $1.98 in 2012 to an estimated $2.42 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 4.66% 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 revealed the company was trading above its Graham Number of $26.28. The company pays a dividend of $0.68 per share, for a yield of 1.6% Its PEmg (price over earnings per share – ModernGraham) was 17.82, 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 $-16.94.

Mondelez International Inc receives an average overall rating in the ModernGraham grading system, scoring a C+.

Stage 3: Information for Further Research

MDLZ charts August 2016

Net Current Asset Value (NCAV) -$16.94
Graham Number $26.28
PEmg 17.82
Current Ratio 0.69
PB Ratio 2.47
Current Dividend $0.68
Dividend Yield 1.58%
Number of Consecutive Years of Dividend Growth 3

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Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2016
Total Current Assets $8,979,000,000
Total Current Liabilities $12,996,000,000
Long-Term Debt $13,578,000,000
Total Assets $63,271,000,000
Intangible Assets $39,522,000,000
Total Liabilities $35,679,000,000
Shares Outstanding (Diluted Average) 1,576,000,000

Earnings Per Share History

Next Fiscal Year Estimate $1.73
Dec2015 $4.44
Dec2014 $1.28
Dec2013 $2.19
Dec2012 $1.71
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
Dec1998 $1.12

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $2.42
Dec2015 $2.62
Dec2014 $1.78
Dec2013 $2.04
Dec2012 $1.98
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
Dec2002 $1.48
Dec2001 $1.15
Dec2000 $1.00

Recommended Reading:

Other ModernGraham posts about the company

Sorry, there was a technical error when trying to pull the prior posts for this company!

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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.

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