DCF Studio

    MKC · NYQ · Consumer Defensive

    McCormick & Company, Incorporated

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 29.55

    Market price

    USD 48.72

    Implied upside

    -39.4%

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

    Value Per Share

    Perpetuity growth
    USD 29.55-39.4%
    Exit multiple
    USD 45.15-7.3%
    Market price
    USD 48.72

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0m377m753mFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 7.0bnUSD 7.2bnUSD 7.4bnUSD 7.6bnUSD 7.7bn+2.5%
    EBITUSD 1.1bnUSD 1.1bnUSD 1.1bnUSD 1.2bnUSD 1.2bn+2.5%
    NOPATUSD 854.3mUSD 875.8mUSD 897.7mUSD 920.2mUSD 943.3m+2.5%
    Add depreciation & amortisationUSD 221.5mUSD 227.1mUSD 232.8mUSD 238.6mUSD 244.6m+2.5%
    Less capital expenditureUSD -270.3mUSD -277.0mUSD -284.0mUSD -291.1mUSD -298.4m+2.5%
    Less increase in working capitalUSD -123.3mUSD -126.4mUSD -129.5mUSD -132.8mUSD -136.1m+2.5%
    Free cashflow to firmUSD 682.3mUSD 699.4mUSD 717.0mUSD 735.0mUSD 753.4m+2.5%
    Discount factor0.96270.89230.82700.76650.7104-
    Present valueUSD 656.9mUSD 624.1mUSD 592.9mUSD 563.3mUSD 535.2m-5.0%
    Present Value Of The ForecastUSD 3.0bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.755Reported 0.634, pulled toward 1.0 (Blume)
    Cost of equity9.15%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 13.1bn75.9% of capital
    Total debtUSD 4.2bn24.1% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC7.89%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 29.55

    75% of EV

    Forecast FCFF, final year
    USD 753.4m
    Capex at depreciation, working capital in reinvestment
    USD 943.3m
    Less reinvestment at g/ROIC (28.9% of NOPAT)
    USD -272.4m
    Capitalised
    USD 670.9m
    ROIC (reported)
    8.7%
    Terminal value, undiscounted
    USD 12.7bn
    Terminal value, discounted
    USD 9.1bn
    Enterprise value
    USD 12.0bn
    Less net debt
    USD 4.1bn
    Equity value
    USD 8.0bn

    Exit at 13.0x EBITDA

    Value per shareUSD 45.15

    82% of EV

    Terminal value, undiscounted
    USD 18.7bn
    Terminal value, discounted
    USD 13.3bn
    Enterprise value
    USD 16.2bn
    Less net debt
    USD 4.1bn
    Equity value
    USD 12.2bn

    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%
    5.89%48.1150.9454.5559.3666.11
    6.89%36.5337.7539.2141.0143.30
    7.89%28.5729.0329.5530.1430.83
    8.89%22.9223.0623.1923.3323.46
    9.89%18.9519.0719.1819.3019.42

    Outlined: this model. Green text: above today's price of 48.72. 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 year2.5%15.4%+12.9pp
    EBIT margin15.4%21.7%+6.2pp
    Discount rate7.9%6.2%-1.7pp
    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.