DCF Studio

    HRL · NYQ · Consumer Defensive

    Hormel Foods Corporation

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 18.30

    Market price

    USD 20.83

    Implied upside

    -12.2%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    Value Per Share

    Perpetuity growth
    USD 18.30-12.2%
    Exit multiple
    USD 21.98+5.5%
    Market price
    USD 20.83

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0m422m844mFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 12.0bnUSD 11.9bnUSD 11.8bnUSD 11.7bnUSD 11.5bn-1.0%
    EBITUSD 1.0bnUSD 1.0bnUSD 1.0bnUSD 1.0bnUSD 1.0bn-1.0%
    NOPATUSD 828.3mUSD 820.4mUSD 812.6mUSD 804.8mUSD 797.2m-1.0%
    Add depreciation & amortisationUSD 249.6mUSD 247.2mUSD 244.9mUSD 242.6mUSD 240.2m-1.0%
    Less capital expenditureUSD -275.5mUSD -272.8mUSD -270.2mUSD -267.7mUSD -265.1m-1.0%
    Less increase in working capitalUSD 41.5mUSD 41.1mUSD 40.8mUSD 40.4mUSD 40.0m+1.0%
    Free cashflow to firmUSD 844.0mUSD 835.9mUSD 828.0mUSD 820.1mUSD 812.3m-1.0%
    Discount factor0.96600.90130.84100.78480.7322-
    Present valueUSD 815.3mUSD 753.5mUSD 696.4mUSD 643.6mUSD 594.8m-7.6%
    Present Value Of The ForecastUSD 3.5bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.541Reported 0.315, pulled toward 1.0 (Blume)
    Cost of equity7.97%Risk-free + beta x equity risk premium
    Cost of debt5.00%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationUSD 11.5bn80.0% of capital
    Total debtUSD 2.9bn20.0% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC7.17%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 18.30

    71% of EV

    Forecast FCFF, final year
    USD 812.3m
    Capex at depreciation, working capital in reinvestment
    USD 815.1m
    Less reinvestment at g/ROIC (33.4% of NOPAT)
    USD -272.3m
    Capitalised
    USD 542.8m
    ROIC (reported)
    7.5%
    Terminal value, undiscounted
    USD 11.9bn
    Terminal value, discounted
    USD 8.7bn
    Enterprise value
    USD 12.2bn
    Less net debt
    USD 2.2bn
    Equity value
    USD 10.1bn

    Exit at 11.7x EBITDA

    Value per shareUSD 21.98

    75% of EV

    Terminal value, undiscounted
    USD 14.7bn
    Terminal value, discounted
    USD 10.7bn
    Enterprise value
    USD 14.3bn
    Less net debt
    USD 2.2bn
    Equity value
    USD 12.1bn

    Spread between methods: 18%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    5.17%28.8330.5632.9136.2941.66
    6.17%22.2422.8623.6324.6125.93
    7.17%17.9718.1218.3018.4918.73
    8.17%15.2315.3015.3615.4215.49
    9.17%13.2313.2813.3313.3913.44

    Outlined: this model. Green text: above today's price of 20.83. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year-1.0%2.7%+3.6pp
    EBIT margin8.7%9.8%+1.0pp
    Discount rate7.2%6.6%-0.5pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.