Current Price: ~ $76/share
Projected Yield: ~ 2.31%
Projected Yield: ~ 2.31%
Smucker is a market leader in coffee, fruit spreads, peanut butter, shortening and oils, ice cream toppings, and health and natural foods and beverages in North America with such brands as Folgers, Smucker's, Jif, Pillsbury, Hungry Jack, and Crisco. The company's brands also include Martha White baking mixes in the United States, as well as Robin Hood flour and baking mixes and Bick's pickles in Canada. International sales account for about 10% of the consolidated total.
I estimated the firm's WACC today at 7.97% using the Capital Asset Pricing Model and the company's recent SEC filings.
Recent free cash flows and growth rates:
| Year | FCF $Millions |
| 2002 | 44 |
| 2003 | 116 |
| 2004 | 26 |
| 2005 | 107 |
| 2006 | 135 |
| 2007 | 216 |
| 2008 | 115 |
| 2009 | 336 |
| 2010 | 576 |
| 2011 | 211 |
Average Annual Growth FCF: ~ 71%
CAGR FCF: ~ 19%
Consensus Forecast Industry 5-Year Growth: ~ 13% per yearConsensus Forecast Company 5-Year Growth: ~ 7% per year
Scenario 1
Average FCF over the past three years is $374 million. Starting at $374 million FCF, assuming the company achieves a 5-year growth rate in FCF of 7% 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 | 374 |
| 1 | 400 |
| 2 | 428 |
| 3 | 458 |
| 4 | 490 |
| 5 | 525 |
| Terminal Value | 7042 |
The firm's future cash flows, discounted at a WACC of 7.97%, give a present value for the entire firm (Debt + Equity) of $6619 million. If the firm's fair value of debt is estimated at $1649 million, then the fair value of the firm's equity could be $4970 million. $4970 million / 114 million outstanding shares is approximately $44 per share and a 20% margin of safety is $35/share.
Scenario 2
Starting at $374 million FCF, assuming the company achieves a 5-year growth rate in FCF of 7% per year, and then a growth rate in FCF of 3.5% per year forever:
Discounted Cash Flow Valuation
| Year | FCF $Millions |
| 0 | 374 |
| 1 | 400 |
| 2 | 428 |
| 3 | 458 |
| 4 | 490 |
| 5 | 525 |
| Terminal Value | 12554 |
The firm's future cash flows, discounted at a WACC of 7.97%, give a present value for the entire firm (Debt + Equity) of $10,376 million. If the firm's fair value of debt is estimated at $1649 million, then the fair value of the firm's equity could be $8727 million. $8727 million / 114 million outstanding shares is approximately $77 per share and a 20% margin of safety is $61/share.
Sources
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
No comments:
Post a Comment