Corteva Stock: My DCF Reveals That The Spin-Off Is Cheap

Summary

• Corteva is an agricultural chemical and seed company.
• Corteva, Inc. was separated from DuPont de Nemours, Inc. Companies that trade in the market as a result of a spin-off are associated with long-term positive abnormal stock returns.
• Market conditions show that there is a trade recovery in China, where consumption may drive global demand. At the same time, Brazil appears to be showing growing demand.
• In my view, the most likely case scenario includes an exit multiple of 20x-25x FCF, which implies a valuation of $48-$57. Corteva currently trades at $39-$41, so I believe that the stock could trade at a higher mark.
• I expect sales to grow from $15.7 billion in 2022 to $18.5 billion in 2025. Capex is close to $1.3 billion with 2025 FCF of $1.4 billion.

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Corteva (NYSE:CTVA) includes in its balance sheet a significant amount of goodwill, which will enhance future free cash flow. In addition, the company is already benefiting from the recovery in the agriculture industry. A conservative DCF with three scenarios

Analyst’s Disclosure: I/we have a beneficial long position in the shares of CTVA either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.