DCF Studio

    KHC · NYQ · Consumer Defensive

    The Kraft Heinz Company

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 40.65

    Market price

    USD 24.43

    Implied upside

    +66.4%

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

    Value Per Share

    Perpetuity growth
    USD 40.65+66.4%
    Exit multiple
    USD 26.43+8.2%
    Market price
    USD 24.43

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn2bn4bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 24.4bnUSD 24.0bnUSD 23.5bnUSD 23.0bnUSD 22.6bn-2.0%
    EBITUSD 4.7bnUSD 4.6bnUSD 4.5bnUSD 4.4bnUSD 4.3bn-2.0%
    NOPATUSD 3.7bnUSD 3.6bnUSD 3.5bnUSD 3.5bnUSD 3.4bn-2.0%
    Add depreciation & amortisationUSD 897.2mUSD 879.4mUSD 862.0mUSD 844.9mUSD 828.2m-2.0%
    Less capital expenditureUSD -915.3mUSD -897.2mUSD -879.4mUSD -862.0mUSD -844.9m-2.0%
    Less increase in working capitalUSD 125.7mUSD 123.2mUSD 120.8mUSD 118.4mUSD 116.0m+2.0%
    Free cashflow to firmUSD 3.8bnUSD 3.7bnUSD 3.6bnUSD 3.6bnUSD 3.5bn-2.0%
    Discount factor0.97230.91920.86900.82150.7766-
    Present valueUSD 3.7bnUSD 3.4bnUSD 3.2bnUSD 2.9bnUSD 2.7bn-7.3%
    Present Value Of The ForecastUSD 15.9bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.385Reported 0.082, pulled toward 1.0 (Blume)
    Cost of equity7.12%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 29.0bn57.7% of capital
    Total debtUSD 21.2bn42.3% of capital, book value as a proxy
    Tax rate20.9%Effective, capped at statutory
    WACC5.78%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 40.65

    76% of EV

    Forecast FCFF, final year
    USD 3.5bn
    Capex at depreciation, working capital in reinvestment
    USD 3.6bn
    Less reinvestment at g/ROIC (42.4% of NOPAT)
    USD -1.5bn
    Capitalised
    USD 2.1bn
    ROIC (reported)
    5.9%
    Terminal value, undiscounted
    USD 64.3bn
    Terminal value, discounted
    USD 49.9bn
    Enterprise value
    USD 65.8bn
    Less net debt
    USD 17.5bn
    Equity value
    USD 48.3bn

    Exit at 8.3x EBITDA

    Value per shareUSD 26.43

    67% of EV

    Terminal value, undiscounted
    USD 42.5bn
    Terminal value, discounted
    USD 33.0bn
    Enterprise value
    USD 48.9bn
    Less net debt
    USD 17.5bn
    Equity value
    USD 31.4bn

    Spread between methods: 42%.

    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%
    3.78%83.7695.67116.72164.56383.59
    4.78%55.1858.0362.0568.2279.04
    5.78%39.9240.2640.6541.1141.69
    6.78%31.8532.0132.1832.3432.51
    7.78%26.0626.2026.3326.4726.61

    Outlined: this model. Green text: above today's price of 24.43. 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-2.0%-10.2%-8.3pp
    EBIT margin19.0%13.2%-5.8pp
    Discount rate5.8%8.2%+2.4pp
    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.