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Campbell Soup Co: Cash Flow Valuation Update

|Includes:Campbell Soup Company (CPB)

Current Price: ~ $42/share
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.

Campbell

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
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(click to enlarge)Click to enlarge

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

Year FCF $Millions
0 683
1 724
2 767
3 813
4 862
5 914
Terminal Value 14616
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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,

  • 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
Click to enlarge
  • 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

Morningstar.com

Yahoo! Finance

Campbell Soup Company

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Stocks: CPB