Food Processing Stocks

Ingredion Inc Valuation – July 2018 $INGR

Company Profile (excerpt from Reuters): Ingredion Incorporated, incorporated on March 27, 1997, is an ingredients solutions provider. The Company manufactures and sells sweetener, starches, nutrition ingredients and biomaterial solutions derived from the wet milling and processing of corn and other starch-based materials to a range of industries, both domestically and internationally. It operates through four segments: North America, South America, Asia Pacific, and Europe, Middle East and Africa (EMEA). It turns corn, tapioca, potatoes, and other vegetables and fruits into ingredients and biomaterials for the food, beverage, paper and corrugating, brewing and other industries. The Company’s product line includes animal feed products and edible corn oil. Its sweetener products include glucose syrups, high maltose syrup, high fructose corn syrup (HFCS), caramel color, dextrose, polyols, maltodextrins and glucose and syrup solids. Its starch-based products include both food-grade and industrial starches, and biomaterials. It also offers specialty ingredients. The Company supplies a range of customers in diverse industries around the world, including the food, beverage, paper and corrugating, brewing, pharmaceutical, textile and personal care industries, as well as the global animal feed and corn oil markets.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of INGR – July 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 $6,969,584,519 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.52 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 161.41% Pass
6. Moderate PEmg Ratio PEmg < 20 14.34 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.32 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 2.52 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.09 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 $6.73
MG Growth Estimate 5.70%
MG Value $133.94
Opinion Undervalued
MG Grade B+
MG Value based on 3% Growth $97.59
MG Value based on 0% Growth $57.21
Market Implied Growth Rate 2.92%
Current Price $96.48
% of Intrinsic Value 72.03%

Ingredion Inc qualifies for both the Defensive Investor and the Enterprising Investor. In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong financial position. . The Enterprising Investor has no initial concerns. 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 $4.88 in 2014 to an estimated $6.73 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.92% 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 Ingredion Inc revealed the company was trading above its Graham Number of $82.1. The company pays a dividend of $2.2 per share, for a yield of 2.3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 14.34, which was below the industry average of 25.4, 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 $-8.41.

Ingredion Inc performs fairly well in the ModernGraham grading system, scoring a B+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$8.41
Graham Number $82.10
PEmg 14.34
Current Ratio 2.52
PB Ratio 2.32
Current Dividend $2.20
Dividend Yield 2.28%
Number of Consecutive Years of Dividend Growth 7

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Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $2,292,000,000
Total Current Liabilities $909,000,000
Long-Term Debt $1,512,000,000
Total Assets $5,975,000,000
Intangible Assets $1,295,000,000
Total Liabilities $2,911,000,000
Shares Outstanding (Diluted Average) 73,600,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $7.46
Dec2017 $7.06
Dec2016 $6.55
Dec2015 $5.51
Dec2014 $4.74
Dec2013 $5.05
Dec2012 $5.47
Dec2011 $5.32
Dec2010 $2.20
Dec2009 $0.54
Dec2008 $3.52
Dec2007 $2.59
Dec2006 $1.63
Dec2005 $1.19
Dec2004 $1.25
Dec2003 $1.06
Dec2002 $0.89
Dec2001 $0.80
Dec2000 $0.68
Dec1999 $0.99
Dec1998 $0.60

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $6.73
Dec2017 $6.17
Dec2016 $5.64
Dec2015 $5.19
Dec2014 $4.88
Dec2013 $4.54
Dec2012 $3.99
Dec2011 $3.11
Dec2010 $2.04
Dec2009 $1.93
Dec2008 $2.43
Dec2007 $1.77
Dec2006 $1.31
Dec2005 $1.11
Dec2004 $1.03
Dec2003 $0.91
Dec2002 $0.81

Recommended Reading:

Other ModernGraham posts about the company

9 Best Stocks for Value Investors This Week – 12/17/16
Ingredion Inc Valuation – Initial Coverage $INGR

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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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