Yield: ~ 2.13%
Campbell Soup Co manufactures & sells branded convenience food products. Its five segments are: U.S. Simple Meals, Global Baking & Snacking, International Simple Meals & Beverages, U.S. Beverages & Bolthouse and Foodservice.
Estimated WACC for the firm today is 6.63% using the Capital Asset Pricing Model and the company's recent SEC filings.
Recent free cash flows and noted growth rates:
Year
|
FCF $Millions
|
2004
|
456
|
2005
|
658
|
2006
|
917
|
2007
|
340
|
2008
|
468
|
2009
|
821
|
2010
|
742
|
2011
|
870
|
2012
|
797
|
2013
|
683
|
Average Annual Growth FCF: ~ 13%
CAGR FCF: ~ 4.6%
Consensus Forecast Industry 5-Year Growth: ~ 14% per year
Consensus Forecast Company 5-Year Growth: ~ 6% per year
Internal Growth Rate: ~ 4%
Sustainable Growth Rate: ~ 35%
Scenario 1
- Start at $683 million FCF
- Assume a 5-year growth rate in FCF of 6% per year, then no growth or 0% growth in FCF per year forever:
Discounted Cash Flow Valuation
The firm's future free cash flows, discounted at a WACC of 6.63%, give a present value for the entire firm (Debt + Equity) of $13959 million. If the firm's fair value of debt is estimated at $3299 million, then the fair value of the firm's equity could be $10660 million. $10660 million / 314 million outstanding shares is approximately $34 per share and a 20% margin of safety is $27/share.
|
Year
|
FCF $Millions
|
|
0
|
683
|
|
1
|
724
|
|
2
|
767
|
|
3
|
813
|
|
4
|
862
|
|
5
|
914
|
|
Terminal Value
|
14616
|
The firm's future free cash flows, discounted at a WACC of 6.63%, give a present value for the entire firm (Debt + Equity) of $13959 million. If the firm's fair value of debt is estimated at $3299 million, then the fair value of the firm's equity could be $10660 million. $10660 million / 314 million outstanding shares is approximately $34 per share and a 20% margin of safety is $27/share.
Scenario 2
All else being equal,
All else being equal,
- Assume a 5-year growth rate in FCF of 9.5% per year, then 0% growth in FCF per year forever:
Discounted Cash Flow Valuation
|
Year
|
FCF $Millions
|
|
0
|
683
|
|
1
|
748
|
|
2
|
819
|
|
3
|
897
|
|
4
|
982
|
|
5
|
1075
|
|
Terminal Value
|
17761
|
- Present Value of the entire firm (Debt + Equity): $16586 million
- Value of Equity: $13287 million or $42/share
- 20% margin of safety is $34/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