It passed
some time since I’ve witten the last article.Today I wish to present a short
and quick valuation of Kerry Group Plc,I will not insist on performance
measures like (profitability,liquidity and risk.)
In this
article I ‘ll focuse on’’Intrinsic Value calculation,but before to start I wish
to say something about the company.Kerry Group Plc develops ,manufactures and
deliveres technology based ingredients flavours for the food and beverage
industry.
After the
researches that I’ve made studying public irish companies ,I consider is the
best by far public irish company.It’s paying their shareholders with increasing
dividends since 1987 .
In
investing is important to understand and try to establish what company’s shares
really worth.
We can
defined intrinsic value simply: ‘’It is the discounted value of cash that can be taken out of a business
during its remaining life.’’ - Warren Buffet CEO Berkshire Hathaway INC
Extract
Cash Flow Statement 2015 (mil euros)
Cash Flow from
Operating activities
Depreciation
and amortization
|
|
Accounts
receivables
|
(11.20)
|
Inventory
|
45.40
|
Account
payables
|
21.60
|
Other
working capital
|
9
|
Other
non-cash items
|
656.50
|
Net cash provided by
operating activities
|
721.30
|
Free
Cash in flow
|
|
Operating
Cash flow
|
721.30
|
Capex
|
(248.40)
|
Free Cash Flow
|
472.90
|
Assumptions:
Starting
cash flow :472.90
Expected
growth rate: 8,20%
Discount
rate : 9,85%
Projected cash flow
2017-2021(mil E)
2017
|
511.67
|
2018
|
553.63
|
2019
|
599.03
|
2020
|
648.15
|
2021
|
701.30
|
(Assuming that the company will follow the expected growth rate 8,20%)
INTRINSIC VALUE CALCULATION
YEAR
|
CASHFLOW
|
DISCOUNT FACTOR 9%
|
PV
|
2017
|
511.67
|
0.917
|
469.20
|
2018
|
553.63
|
0.842
|
465.62
|
2019
|
599.03
|
0.772
|
462.45
|
2020
|
648.15
|
0.650
|
455.84
|
NPV : 2312
NPV :
2312
YEAR 5 NPV*12 :
701
Total cash,cash
equivalents and short term investments:
8415.6
Total
Intrinsic value:
: 11 993
No of outstanding
shares 31 Dec 2016 :176 mil
Total
Intrinsic Value per share :68.14/euros
Actual
Stock Price
:69.81/euros
RGV (RELATIVE GRAHAM VALUE)
:0.97
INTRINSIC
VALUE/STOCK PRICE :68.14/69.81=O.97
AN RGV LESS THAN ONE
INDICATES THAT THE STOCK IS OVERVALUED AND SHOULD NOT BE BOUGHT.
MARGIN
OF SAFETY:
2,45%
1-
STOCKS CURENT
PRICE/STOCK INTRINSIC VALUE
CConclusions: Despite that Kerry Group Plc is an amazing company my advice is to not buy this stock because his intrinsic value is less than curent stock price.2.45 % margin of safety is not enough to buy the company in this moment at 50 euros/share or less is ideal.
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