Projected Yield: ~ 3.09%
With operations that began more than 150 years ago, General Mills is now a leading global manufacturer and marketer of branded consumer foods, such as ready-to-eat breakfast cereals, refrigerated dough and other baking items, snack foods, ice cream, and yogurt. Its portfolio of well-known brands includes Cheerios, Betty Crocker, Pillsbury, Haagen-Dazs, and Yoplait. International sales account for about 20% of the firm's consolidated revenue.
I estimated the firm's WACC today at 5.50% using the Capital Asset Pricing Model and the company's recent SEC filings.
Recent free cash flows and noted growth rates:
Year | FCF $Millions |
2001 | 429 |
2002 | 407 |
2003 | 920 |
2004 | 833 |
2005 | 1297 |
2006 | 1411 |
2007 | 1305 |
2008 | 1208 |
2009 | 1266 |
2010 | 1531 |
TTM | 1217 |
Average Annual Growth FCF: approx. 21%
CAGR FCF: approx. 15%
Consensus Forecast Industry 5-Year Growth: approx. 14% per yearConsensus Forecast Company 5-Year Growth: approx. 8% per year
Assuming the company achieves a 5-year growth rate in FCF of 8% per year, and assuming that after the next five years, the company achieves no growth in FCF or 0% growth per year forever:
Discounted Cash Flow Valuation
Year | FCF $Millions |
0 | 1217 |
1 | 1314 |
2 | 1420 |
3 | 1533 |
4 | 1656 |
5 | 1788 |
Terminal Value | 35107 |
The firm's future cash flows, discounted at a WACC of 5.50%, give a present value for the entire firm (Debt + Equity) of $33,391 million. If the firm's fair value of debt is estimated at $7361 million, then the fair value of the firm's equity could be $26,030 million. $26,030 million / 638 million outstanding shares is approximately $41 per share and a 20% margin of safety is $33/share.
Sources
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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