PLEXOR's opinion about TYSON FOODS (NYSE:TSN) current market value is discussed in this post.
More specifically the Free Cash Flows future growth rate expressed by the market and embedded into current shares price is investigated based on the evidences from the particular method employed.
Said rate is then compared with an estimated sustainable future growth rate to check if any under/over or fair evaluation may exist.
In a DCF model, it is possible to infer from the current market price a 7.6% perspective annual FCFs growth rate for the next 10 years, based on: • $1,716 M of FCF (cash provided by operating activities minus additions to property, plant and equipment) as a starting point • long term growth rate estimate for the FCF of 2.8% per year (annual world economy forecasted growth rate towards the year 2040) • $1,282 M of total estimated value of operating leases, stock options, retirement and post retirement unfunded obligations • applying an estimated WACC value of 14% (Weighted Average Cost of Capital has been computed based on an estimated 36.3% effective tax rate, an adjusted beta of 0.87; both the Gordon and the CAPM models were applied. A 50% increase in the quarterly dividend on class A shares has also been taken into consideration).
Albeit revenues' CAGR from FY2010 and OCF's CAGR from FY1998 are respectively equal to 7.8% and 10.2%, the company has recently forecasted, for fiscal 2016, an organic growth for sales of just approx. 1.5%. ("…Now, looking forward, here are some thoughts on fiscal 2016. We believe sales should be around $41 billion, which represents approximately 1.5% organic growth as we offset the impact of fiscal 2015 divestitures…." Extract from Q4 2015 Earnings Call dated 23-Nov-2015.).
Based on said assumptions PLEXOR believes that the Company is currently overvalued by the market.
PLEXOR's opinion, at per share price of $49.18 (TYSON FOODS Inc., H15.15 GMT on 24 November 2015, NYSE) and based on assumptions and estimates made, is now: "short". Horizon: Until next earnings date.
THIS POST DISCUSSES MY OPINION AND REASONABLE EFFORT HAS BEEN USED TO ENSURE ACCURACY OF THE INFORMATION PROVIDED. HOWEVER, THERE MAY BE INACCURACIES DUE TO HUMAN OR OTHER ERROR. THOSE INACCURACIES INCLUDE, BUT ARE NOT LIMITED TO, INCONSISTENCIES, OMISSIONS, AND SPELLING MISTAKES. NO RESPONSIBILITY IS ASSUMED FOR ANY ERRORS OR FOR THE CONSEQUENCES OF RELYING OR ACTING ON THE INFORMATION PROVIDED IN THIS ARTICLE. IN NO EVENT WILL THE CONTRIBUTOR BE LIABLE FOR ANY DIRECT, INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES, NO MATTER WHAT THE CAUSE.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.