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.

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 |

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 |

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 |

- 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

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