McCormick & Co (MKC.V:NYS) Fundamental Valuation Report

Fundamental Valuation Report

McCormick & Co(MKC.V:NYS)

Consumer Defensive:Packaged Foods

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Close Price/Date
$122.00 (USD) 25/01/2019

Weighted Valuation
$123.72 (USD)

Overall Rating
Fairly valued to slightly Undervalued by 1.4%

Valuation Models Analyst Consensus: $135.25 (USD)
(in order of importance) Comparables: $96.75 (USD)
Adjusted Book Value: $143.04 (USD)
Valuation Methods This company is:
Cash Flow: Undervalued on a Cash Flow Valuation
Comparable Company: Overvalued on a Comparable Valuation
Asset: Undervalued on an Asset Valuation

Company Overview (MKC.V:NYS USD)

Price 0.00
Range 0.00 – 0.00
52 week 0.00 – 0.00
Open 0.00
Vol / Avg. 0/0
Mkt cap 0
P/E 0.00
Div/yield 0.00/0.00
EPS 0.00
Shares 0
Beta 0.00

Company Description

In its nearly 130-year history, McCormick has become the leading global manufacturer, marketer, and distributor of spices, herbs, extracts, seasonings, and other flavorings. McCormick’s customer base includes top quick-service restaurants, retail grocery chains, and other packaged food manufacturers, with about 45% of sales generated beyond its home turf to include 150 other countries and territories. Beyond its namesake brand, the firm’s portfolio includes Old Bay, Zatarain’s, Thai Kitchen, and the recently acquired Frank’s RedHot and French’s brand.

Valuation Details

 We have up to 6 valuation points for each company. Details are at the bottom of the report.

Discounted Cash Flow and Sensitivity Analysis for MKC.V:NYS

Using a discounted cash flow model we generated an intrinsic value of $224.50 (USD) for MKC.V:NYS

Sensitivity Analysis

(showing how changes in the input variables impact the DCF calculation)

MKC.V:NYS Current Values Valuation If Dropped * Valuation If Raised *
Calculated Value: $224.50 1% 5% 1% 5%
WACC (or Ke) 5.78 $284.13 $184.81
Terminal Growth Rate 0.80 $188.50 $278.58
Tax Rate -0.21 $234.03 $214.98
Cash Flow 1,282,073,776 $212.97 $236.03
Capital Expenditures 3,320,000 $224.53 $224.48
Long Term Debt 1,617,800,000 $225.11 $223.89

* Changes are absolute: ex WACC from 8% to 7%

Comparables Model

Using similar companies and price based ratios we generated a valuation of $96.75 (USD) for MKC.V:NYS. We also generated a valuation of $73.65 (USD) using other metrics and comparables.
The comparable companies were General Mills (GIS:NYS), Hormel Foods (HRL:NYS), Kraft Heinz (KHC:NAS), Lancaster Colony (LANC:NAS) and Pilgrims Pride (PPC:NAS).

Company MKC.V:NYS End Date Value
Earnings/Share $7.00 (USD)
Book Value/Share $23.56 (USD)
Sales/Share $40.68 (USD)
Cash Flow/Share $6.79 (USD)
EBITDA/Share $8.01 (USD)
Price Based on Comps Adjustment Factor (%)
$115.96 (USD) -35.1
$82.26 (USD) -7.2
$82.40 (USD) 87.7
$101.95 (USD) -52.3
$113.45 (USD) 43.4
21.37 PE Ratio 16.57 11.35 22.95 5.09 33.56 9.88
5.89 PB Ratio 3.49 3.49 4.07 0.80 7.21 1.88
3.41 PS Ratio 2.03 1.43 2.43 2.00 3.92 0.35
20.44 PCF Ratio 20.21 8.69 18.69 37.44 29.87 6.35
22.60 EV to EBITDA 14.17 12.68 16.78 12.47 22.71 6.21


Using a multiples approach we generated a valuation of  $147.60 (USD) for MKC.V:NYS

Company MKC.V:NYS End Date Value
Earnings/Share $7.00 (USD)
Book Value/Share $23.56 (USD)
Sales/Share $40.68 (USD)
Cash Flow/Share $6.79 (USD)
EBITDA/Share $8.01 (USD)
Price Based on Comps Adjustment Factor
$194.97 (USD) 0
$143.19 (USD) 0
$112.46 (USD) 0
$134.42 (USD) 0
$152.95 (USD) 0
Ratios Ratio Average
PE Ratio 27.85
PB Ratio 6.08
PS Ratio 2.76
PCF Ratio 19.80
EV to EBITDA 19.10

Adjusted Book Value versus Historical Price to Book

The average the Price to Book ratio for  MKC.V:NYS for the last 10 years was  5.96

We ran the Adjusted Book Value for  MKC.V:NYS and generated a book value of  $24.00 (USD)
By multiplying these we get an adjusted valuation of  $143.04 (USD)

Analyst Data

In the Stockcalc database there are 4 analysts that provide a valuation for MKC.V:NYS. The 4 analysts have a concensus valuation for MKC.V:NYS for 2019 of $135.25 (USD).

MKC.V:NYS McCormick & Co

Analyst Recommendation
Buy Hold Sell Rating
(of 5)
Guidance As Of
0 3 2 2.2000 Underperform 2019-1-24

Current Price: 122 USD

Analyst Consensus
USD Millions 2019 2020
Mean EPS 5.38 5.72
# EPS Analysts 5 2
Mean Revenue 5,648.20 5,818.50
# Revenue Analysts 4 2
Mean Target Price 135.25
Mean Cash Flow 6.41 7.34
Mean EBITDA 1,183.00 1,249.30
Mean Net Income 709.80 763.90
Mean Debt Outstanding 4,054.70 3,613.90
Mean Tax Rate 23.00 23.00
Mean Growth Rate 8.88
Mean Capital Expenditure 192.70 207.80

Explanation of Valuation Models

We have up to 6 valuation points for each company in the database.

The Discounted Cash Flow (DCF) valuation is a cash flow model where cash flow projections are discounted back to the present to calculate value per share. DCF is a common valuation technique especially for companies undergoing irregular cash flows such as resource companies (mining, forestry, oil and gas) going though price cycles or smaller companies about to generate cash flow (junior exploration companies, junior pharma, technology firms…).

The Price Comparables valuation is the result of valuing the company we are looking at on the basis of ratios from selected comparable companies: Price to Earnings, Price to Book, Price to Sales, Price to Cash Flow, Enterprise Value (EV) to EBITDA. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

We have included the Other Comparables as a way to value companies that cannot be valued using Earnings based ratios. This technique is very useful for companies still experiencing negative cash flows such as mining exploration firms. We use Cash/Share, Book Value/Share, MarketCap, 1 Year Return, NetPPE as the ratios here. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

Multiples are similar to Price comparables where we look at current or historic ratios for the company in question to assess what it should be worth today based on those historic ratios. We use the same 5 ratios as in the price comparables and value the company with its historic averages.

With Adjusted Book Value (ABV) we calculate the book value per share for the company based on its balance sheet and multiply that book value per share by its historical price to book ratio to calculate a value per share.

If we have Analyst coverage for the company we use the consensus target price here.

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