Current Price: ~ $37/share

Yield: ~ 3.17%

With a heritage that dates back about 140 years, Campbell Soup is now a leading global manufacturer and marketer of branded convenience food products, most notably soup. However, the firm's product assortment spans beyond soup, as its portfolio of well-known brands includes Campbell's, Pace, Prego, Swanson, V8, and Pepperidge Farm. International operations account for around 30% of Campbell's consolidated sales.

Estimated WACC for the firm today is 4.25% using the Capital Asset Pricing Model and the company's recent SEC filings.

Recent free cash flows and noted growth rates:

Year | FCF $Millions |

2003 | 590 |

2004 | 456 |

2005 | 658 |

2006 | 917 |

2007 | 340 |

2008 | 468 |

2009 | 821 |

2010 | 742 |

2011 | 870 |

2012 | 797 |

Average Annual Growth FCF: ~ 12%

CAGR FCF: ~ 3%

Consensus Forecast Industry 5-Year Growth: ~ 14% per year

Consensus Forecast Company 5-Year Growth: ~ 5% per year

Internal Growth Rate: ~ 6%

**Scenario 1**

Average the high and low FCF of the past 5 years; Average FCF (2011, 2008) is $669 million

- Start at $669 million FCF
- Assume a 5-year growth rate in FCF of 3% per year, then no growth or 0% growth in FCF per year forever:

Discounted Cash Flow Valuation

Year | FCF $Millions |

0 | 669 |

1 | 689 |

2 | 710 |

3 | 731 |

4 | 753 |

5 | 776 |

Terminal Value | 18799 |

The firm's future free cash flows, discounted at a WACC of 4.25%, give a present value for the entire firm (Debt + Equity) of $18494 million. If the firm's fair value of debt is estimated at $2663 million, then the fair value of the firm's equity could be $15831 million. $15831 million / 314 million outstanding shares is approximately $50 per share and a 20% margin of safety is $40/share.

**Scenario 2**

Average FCF (2012, 2011, 2010) is $803 million

- Start at $803 million FCF
- Assume a higher WACC of 6.25%
- Assume a 5-year growth rate in FCF of 5% per year, then 0% growth in FCF per year forever:

Discounted Cash Flow Valuation

Year | FCF $Millions |

0 | 803 |

1 | 843 |

2 | 885 |

3 | 930 |

4 | 976 |

5 | 1025 |

Terminal Value | 17218 |

All else being equal,

- Present Value of the entire firm (Debt + Equity): $16591 million
- Value of Equity: $13928 million or $44/share
- 20% margin of safety is $35/share

Sources

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