Using an unlevered Free Cash Flow to Firm (FCFF) model, we project Hormel Foods Corporation's cash flows over 5 years with line-by-line expense modeling. Revenue is projected revenue growing from 1.6% to 1.5% annually, with expenses (COGS, SG&A, R&D) held at historical ratios. Depreciation is computed from a vintage matrix based on a 5-year useful life. Working capital is modeled using historical turnover days (DSO 27, DPO 28, DIO 59). At a 6.2% WACC with mid-year discounting, the terminal value (74% of enterprise value) is derived by applying the industry peer median EV/EBITDA multiple of 9.7x to Year 6 EBITDA. After subtracting net debt, the equity value implies a fair price of $22.57 per share, suggesting HRL is fairly valued by 1.3% at the current price of $22.86.
Adjust parameters to explore scenarios. Changes are for exploration only and do not affect saved valuations.
| 2026 | 2027 | 2028 | 2029 | 2030 | Terminal | |
|---|---|---|---|---|---|---|
| Profit Before Tax | 1,024 | 1,042 | 1,067 | 1,084 | 1,100 | 1,128 |
| (−) Net Interest | 69 | 70 | 72 | 73 | 74 | 76 |
| (+) D&A | 269 | 278 | 279 | 282 | 289 | 296 |
| EBITDA | 1,362 | 1,391 | 1,418 | 1,439 | 1,464 | 1,501 |
| (−) Tax | 232 | 236 | 241 | 245 | 249 | — |
| (−) CapEx | 276 | 281 | 287 | 292 | 296 | — |
| (−) ΔWC | -116 | 32 | 43 | 29 | 29 | — |
| Free Cash Flow (FCF) | 971 | 843 | 846 | 874 | 890 | — |
| Peers' EBITDA Multiple | 9.7x | |||||
| Terminal Value | 14,526 | |||||
| WACC / Discount Rate | 6.15% | |||||
| Timing of FCF (mid year) | 0.5 | 1.5 | 2.5 | 3.5 | 4.5 | 5 |
| Present Value of FCF | 943 | 771 | 729 | 709 | 680 | 10,779 |
| Enterprise Value | 14,610 | |||||
| Projection Period | 3,831 | 26.2% | ||||
| Terminal Value | 10,779 | 73.8% | ||||
| (−) Current Net Debt | 2,187 | |||||
| Equity Value | 12,424 | |||||
| (÷) Outstanding Shares | 550M | |||||
| Fair Price | $23 | -1.3% | ||||
| WACC \ EV/EBITDA Exit Multiple | 5.7x | 7.7x | 9.7x | 11.7x | 13.7x |
|---|---|---|---|---|---|
| 4.1% | $16 | $20 | $25 | $29 | $34 |
| 5.1% | $15 | $19 | $24 | $28 | $32 |
| 6.1% | $14 | $19 | $23 | $27 | $31 |
| 7.1% | $14 | $18 | $22 | $25 | $29 |
| 8.1% | $13 | $17 | $21 | $24 | $28 |
Current price: $22.86. Green = undervalued, Red = overvalued.
Based on default parameters
This is an unlevered Free Cash Flow to Firm (FCFF) model with a 5-year projection period. Revenue, expenses, D&A, and working capital are projected using the same line-by-line approach as the Growth Exit models. The key difference is the terminal value methodology: instead of assuming perpetual cash flow growth, the terminal value is calculated by applying the industry peer median EV/EBITDA multiple to the projected Year 6 EBITDA.
Using a peer exit multiple anchors the terminal value to how the market currently prices comparable companies, rather than relying on a theoretical perpetual growth assumption. This approach captures relative valuation dynamics and is particularly useful when a company is expected to converge toward industry-average profitability over time. The sensitivity matrix shows how fair value changes across different WACC and EV/EBITDA multiple scenarios.