Mondelez International Inc (MDLZ, Financial) recently experienced a daily loss of -5.69%, and a 3-month loss of -14.19%. Despite these losses, the company reported Earnings Per Share (EPS) of 3.02. Is the stock modestly undervalued as per the GF Value? In this article, we will explore the financials and valuation metrics of Mondelez International (MDLZ) to answer this question. Let's dive into the analysis.
Company Overview
Mondelez International Inc has been operating independently since its split from the former Kraft Foods North American grocery business in October 2012. As a leading player in the global snack arena, it has a significant presence in biscuits, chocolate, gum/candy, beverages, and cheese and grocery aisles. Known for brands like Oreo, Chips Ahoy, Halls, and Cadbury. It derives around one third of its revenue from developing markets, 36% from Europe, and the rest from North America.
The current stock price is $61.37, while the estimated GF Value is $79.25, hinting at a potential undervaluation of the stock. Let's delve deeper into the company's financials and valuation metrics to understand this better.
Understanding GF Value
The GF Value is a proprietary measure that estimates a stock's intrinsic value based on historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. If the stock price is significantly above the GF Value Line, it indicates overvaluation and potential poor future returns. Conversely, if it's significantly below the GF Value Line, the stock may be undervalued, implying higher future returns.
For Mondelez International, the GF Value suggests that the stock might be modestly undervalued. As a result, the long-term return of its stock is likely to be higher than its business growth.
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Financial Strength
Investing in companies with poor financial strength can lead to a high risk of permanent capital loss. Therefore, it's crucial to review a company's financial strength before purchasing its shares. Mondelez International's cash-to-debt ratio is 0.07, ranking worse than 82.67% of companies in the Consumer Packaged Goods industry. However, its overall financial strength is fair, with a score of 5 out of 10.
Profitability and Growth
Investing in profitable companies, especially those with consistent profitability over the long term, is generally less risky. Mondelez International has been profitable 10 over the past 10 years. Its operating margin is 13.49%, which ranks better than 82.3% of companies in the Consumer Packaged Goods industry. This results in a profitability rank of 7 out of 10, indicating fair profitability.
One key factor in a company's valuation is its growth . Companies that grow faster create more value for shareholders, especially if the growth is profitable. Mondelez International's average annual revenue growth is 8.6%, ranking better than 57.22% of companies in the Consumer Packaged Goods industry. However, its 3-year average EBITDA growth is 0.2%, which ranks worse than 60.58% of companies in the same industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted cost of capital (WACC) can provide insights into its profitability. ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. Over the past 12 months, Mondelez International's ROIC was 4.98, while its WACC came in at 7.16.
Conclusion
Overall, the stock of Mondelez International shows signs of being modestly undervalued. The company's financial condition and profitability are fair, but its growth ranks worse than 60.58% of companies in the Consumer Packaged Goods industry. To learn more about Mondelez International's stock, you can check out its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
