Intrinsic value of Kraft Heinz - KHC

Previous Close

$77.10

  Intrinsic Value

$47.39

stock screener

  Rating & Target

sell

-39%

  Value-price divergence*

+209%

Previous close

$77.10

 
Intrinsic value

$47.39

 
Up/down potential

-39%

 
Rating

sell

 
Value-price divergence*

+209%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of KHC stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 93.7

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  44.44
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  26,487
  27,017
  27,638
  28,348
  29,146
  30,029
  30,999
  32,055
  33,198
  34,429
  35,750
  37,163
  38,672
  40,278
  41,984
  43,796
  45,715
  47,746
  49,895
  52,165
  54,562
  57,091
  59,758
  62,569
  65,531
  68,651
  71,936
  75,393
  79,031
  82,859
  86,885
Variable operating expenses, $m
 
  15,311
  15,562
  15,849
  16,170
  16,527
  16,918
  17,344
  17,805
  18,301
  18,834
  14,992
  15,601
  16,248
  16,937
  17,668
  18,442
  19,261
  20,128
  21,044
  22,011
  23,031
  24,107
  25,241
  26,436
  27,695
  29,020
  30,414
  31,882
  33,426
  35,050
Fixed operating expenses, $m
 
  5,509
  5,647
  5,788
  5,933
  6,081
  6,233
  6,389
  6,549
  6,713
  6,880
  7,052
  7,229
  7,409
  7,595
  7,785
  7,979
  8,179
  8,383
  8,593
  8,808
  9,028
  9,253
  9,485
  9,722
  9,965
  10,214
  10,469
  10,731
  10,999
  11,274
Total operating expenses, $m
  20,345
  20,820
  21,209
  21,637
  22,103
  22,608
  23,151
  23,733
  24,354
  25,014
  25,714
  22,044
  22,830
  23,657
  24,532
  25,453
  26,421
  27,440
  28,511
  29,637
  30,819
  32,059
  33,360
  34,726
  36,158
  37,660
  39,234
  40,883
  42,613
  44,425
  46,324
Operating income, $m
  6,142
  6,196
  6,429
  6,712
  7,043
  7,422
  7,848
  8,322
  8,844
  9,415
  10,035
  15,119
  15,842
  16,620
  17,453
  18,343
  19,294
  20,306
  21,384
  22,528
  23,744
  25,032
  26,398
  27,844
  29,374
  30,992
  32,702
  34,510
  36,418
  38,433
  40,560
EBITDA, $m
  7,479
  12,897
  13,183
  13,525
  13,924
  14,378
  14,886
  15,449
  16,068
  16,743
  17,476
  18,267
  19,118
  20,031
  21,009
  22,053
  23,166
  24,351
  25,610
  26,947
  28,365
  29,868
  31,459
  33,143
  34,924
  36,807
  38,795
  40,895
  43,112
  45,452
  47,919
Interest expense (income), $m
  1,176
  1,218
  1,267
  1,325
  1,391
  1,466
  1,549
  1,639
  1,738
  1,845
  1,960
  2,083
  2,216
  2,357
  2,507
  2,666
  2,836
  3,015
  3,205
  3,406
  3,618
  3,843
  4,079
  4,328
  4,591
  4,868
  5,160
  5,467
  5,790
  6,131
  6,489
Earnings before tax, $m
  5,023
  4,978
  5,162
  5,387
  5,651
  5,956
  6,299
  6,683
  7,106
  7,570
  8,075
  13,035
  13,627
  14,263
  14,946
  15,677
  16,458
  17,291
  18,178
  19,122
  20,125
  21,190
  22,319
  23,515
  24,782
  26,123
  27,542
  29,042
  30,628
  32,303
  34,072
Tax expense, $m
  1,381
  1,344
  1,394
  1,454
  1,526
  1,608
  1,701
  1,804
  1,919
  2,044
  2,180
  3,520
  3,679
  3,851
  4,035
  4,233
  4,444
  4,669
  4,908
  5,163
  5,434
  5,721
  6,026
  6,349
  6,691
  7,053
  7,436
  7,841
  8,270
  8,722
  9,199
Net income, $m
  3,632
  3,634
  3,768
  3,932
  4,125
  4,348
  4,598
  4,878
  5,187
  5,526
  5,895
  9,516
  9,948
  10,412
  10,911
  11,444
  12,014
  12,623
  13,270
  13,959
  14,691
  15,468
  16,293
  17,166
  18,091
  19,070
  20,106
  21,201
  22,358
  23,581
  24,872

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  4,204
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  120,480
  118,494
  121,220
  124,335
  127,833
  131,708
  135,960
  140,591
  145,603
  151,003
  156,798
  162,998
  169,613
  176,657
  184,142
  192,086
  200,504
  209,414
  218,837
  228,794
  239,306
  250,399
  262,097
  274,427
  287,419
  301,102
  315,508
  330,672
  346,629
  363,416
  381,074
Adjusted assets (=assets-cash), $m
  116,276
  118,494
  121,220
  124,335
  127,833
  131,708
  135,960
  140,591
  145,603
  151,003
  156,798
  162,998
  169,613
  176,657
  184,142
  192,086
  200,504
  209,414
  218,837
  228,794
  239,306
  250,399
  262,097
  274,427
  287,419
  301,102
  315,508
  330,672
  346,629
  363,416
  381,074
Revenue / Adjusted assets
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
Average production assets, $m
  67,315
  68,650
  70,228
  72,033
  74,060
  76,305
  78,768
  81,451
  84,355
  87,483
  90,841
  94,432
  98,265
  102,346
  106,683
  111,284
  116,161
  121,324
  126,783
  132,551
  138,641
  145,068
  151,845
  158,989
  166,515
  174,443
  182,789
  191,574
  200,819
  210,545
  220,774
Working capital, $m
  -748
  -2,296
  -2,349
  -2,410
  -2,477
  -2,553
  -2,635
  -2,725
  -2,822
  -2,926
  -3,039
  -3,159
  -3,287
  -3,424
  -3,569
  -3,723
  -3,886
  -4,058
  -4,241
  -4,434
  -4,638
  -4,853
  -5,079
  -5,318
  -5,570
  -5,835
  -6,115
  -6,408
  -6,718
  -7,043
  -7,385
Total debt, $m
  32,404
  30,899
  32,316
  33,936
  35,755
  37,770
  39,981
  42,389
  44,996
  47,804
  50,817
  54,041
  57,481
  61,143
  65,036
  69,167
  73,544
  78,177
  83,077
  88,255
  93,721
  99,489
  105,572
  111,984
  118,740
  125,855
  133,346
  141,232
  149,529
  158,258
  167,440
Total liabilities, $m
  63,122
  61,617
  63,034
  64,654
  66,473
  68,488
  70,699
  73,107
  75,714
  78,522
  81,535
  84,759
  88,199
  91,861
  95,754
  99,885
  104,262
  108,895
  113,795
  118,973
  124,439
  130,207
  136,290
  142,702
  149,458
  156,573
  164,064
  171,950
  180,247
  188,976
  198,158
Total equity, $m
  57,358
  56,877
  58,186
  59,681
  61,360
  63,220
  65,261
  67,484
  69,889
  72,481
  75,263
  78,239
  81,414
  84,795
  88,388
  92,201
  96,242
  100,519
  105,042
  109,821
  114,867
  120,191
  125,806
  131,725
  137,961
  144,529
  151,444
  158,723
  166,382
  174,440
  182,915
Total liabilities and equity, $m
  120,480
  118,494
  121,220
  124,335
  127,833
  131,708
  135,960
  140,591
  145,603
  151,003
  156,798
  162,998
  169,613
  176,656
  184,142
  192,086
  200,504
  209,414
  218,837
  228,794
  239,306
  250,398
  262,096
  274,427
  287,419
  301,102
  315,508
  330,673
  346,629
  363,416
  381,073
Debt-to-equity ratio
  0.565
  0.540
  0.560
  0.570
  0.580
  0.600
  0.610
  0.630
  0.640
  0.660
  0.680
  0.690
  0.710
  0.720
  0.740
  0.750
  0.760
  0.780
  0.790
  0.800
  0.820
  0.830
  0.840
  0.850
  0.860
  0.870
  0.880
  0.890
  0.900
  0.910
  0.920
Adjusted equity ratio
  0.463
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  3,632
  3,634
  3,768
  3,932
  4,125
  4,348
  4,598
  4,878
  5,187
  5,526
  5,895
  9,516
  9,948
  10,412
  10,911
  11,444
  12,014
  12,623
  13,270
  13,959
  14,691
  15,468
  16,293
  17,166
  18,091
  19,070
  20,106
  21,201
  22,358
  23,581
  24,872
Depreciation, amort., depletion, $m
  1,337
  6,701
  6,753
  6,814
  6,881
  6,956
  7,038
  7,128
  7,224
  7,329
  7,441
  3,148
  3,276
  3,412
  3,556
  3,709
  3,872
  4,044
  4,226
  4,418
  4,621
  4,836
  5,062
  5,300
  5,551
  5,815
  6,093
  6,386
  6,694
  7,018
  7,359
Funds from operations, $m
  6,267
  10,335
  10,522
  10,746
  11,007
  11,304
  11,637
  12,006
  12,412
  12,855
  13,335
  12,664
  13,223
  13,824
  14,467
  15,154
  15,886
  16,667
  17,496
  18,378
  19,313
  20,304
  21,354
  22,466
  23,642
  24,885
  26,199
  27,587
  29,052
  30,599
  32,231
Change in working capital, $m
  1,029
  -45
  -53
  -60
  -68
  -75
  -82
  -90
  -97
  -105
  -112
  -120
  -128
  -137
  -145
  -154
  -163
  -173
  -183
  -193
  -204
  -215
  -227
  -239
  -252
  -265
  -279
  -294
  -309
  -325
  -342
Cash from operations, $m
  5,238
  10,380
  10,575
  10,806
  11,074
  11,379
  11,719
  12,096
  12,509
  12,959
  13,448
  12,784
  13,351
  13,960
  14,612
  15,308
  16,050
  16,839
  17,679
  18,571
  19,516
  20,519
  21,581
  22,705
  23,893
  25,150
  26,478
  27,881
  29,361
  30,925
  32,574
Maintenance CAPEX, $m
  0
  -2,244
  -2,288
  -2,341
  -2,401
  -2,469
  -2,543
  -2,626
  -2,715
  -2,812
  -2,916
  -3,028
  -3,148
  -3,276
  -3,412
  -3,556
  -3,709
  -3,872
  -4,044
  -4,226
  -4,418
  -4,621
  -4,836
  -5,062
  -5,300
  -5,551
  -5,815
  -6,093
  -6,386
  -6,694
  -7,018
New CAPEX, $m
  -1,247
  -1,335
  -1,579
  -1,805
  -2,026
  -2,245
  -2,464
  -2,683
  -2,904
  -3,128
  -3,357
  -3,592
  -3,833
  -4,081
  -4,337
  -4,602
  -4,877
  -5,162
  -5,459
  -5,768
  -6,090
  -6,426
  -6,777
  -7,144
  -7,527
  -7,927
  -8,346
  -8,785
  -9,245
  -9,726
  -10,230
Cash from investing activities, $m
  -1,113
  -3,579
  -3,867
  -4,146
  -4,427
  -4,714
  -5,007
  -5,309
  -5,619
  -5,940
  -6,273
  -6,620
  -6,981
  -7,357
  -7,749
  -8,158
  -8,586
  -9,034
  -9,503
  -9,994
  -10,508
  -11,047
  -11,613
  -12,206
  -12,827
  -13,478
  -14,161
  -14,878
  -15,631
  -16,420
  -17,248
Free cash flow, $m
  4,125
  6,801
  6,707
  6,660
  6,647
  6,665
  6,712
  6,787
  6,890
  7,019
  7,174
  6,164
  6,371
  6,604
  6,863
  7,150
  7,463
  7,805
  8,176
  8,576
  9,008
  9,471
  9,968
  10,499
  11,067
  11,672
  12,317
  13,002
  13,731
  14,505
  15,326
Issuance/(repayment) of debt, $m
  852
  1,186
  1,417
  1,620
  1,819
  2,015
  2,211
  2,408
  2,606
  2,808
  3,013
  3,224
  3,440
  3,663
  3,893
  4,131
  4,377
  4,633
  4,900
  5,177
  5,466
  5,768
  6,083
  6,412
  6,756
  7,115
  7,491
  7,885
  8,298
  8,729
  9,182
Issuance/(repurchase) of shares, $m
  -1,640
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -857
  1,186
  1,417
  1,620
  1,819
  2,015
  2,211
  2,408
  2,606
  2,808
  3,013
  3,224
  3,440
  3,663
  3,893
  4,131
  4,377
  4,633
  4,900
  5,177
  5,466
  5,768
  6,083
  6,412
  6,756
  7,115
  7,491
  7,885
  8,298
  8,729
  9,182
Total cash flow (excl. dividends), $m
  3,131
  7,987
  8,125
  8,280
  8,466
  8,680
  8,923
  9,195
  9,496
  9,827
  10,188
  9,388
  9,811
  10,267
  10,756
  11,280
  11,840
  12,438
  13,076
  13,754
  14,474
  15,239
  16,051
  16,911
  17,823
  18,787
  19,808
  20,888
  22,029
  23,234
  24,508
Retained Cash Flow (-), $m
  8,647
  -1,032
  -1,308
  -1,495
  -1,679
  -1,860
  -2,041
  -2,223
  -2,406
  -2,592
  -2,782
  -2,976
  -3,175
  -3,381
  -3,593
  -3,813
  -4,041
  -4,277
  -4,523
  -4,779
  -5,046
  -5,324
  -5,615
  -5,919
  -6,236
  -6,568
  -6,915
  -7,279
  -7,659
  -8,058
  -8,476
Prev. year cash balance distribution, $m
 
  1,513
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  8,468
  6,816
  6,785
  6,787
  6,820
  6,882
  6,973
  7,090
  7,235
  7,406
  6,412
  6,636
  6,886
  7,163
  7,467
  7,800
  8,161
  8,553
  8,974
  9,428
  9,915
  10,436
  10,993
  11,587
  12,220
  12,893
  13,609
  14,369
  15,176
  16,032
Discount rate, %
 
  6.90
  7.25
  7.61
  7.99
  8.39
  8.81
  9.25
  9.71
  10.19
  10.70
  11.24
  11.80
  12.39
  13.01
  13.66
  14.34
  15.06
  15.81
  16.61
  17.44
  18.31
  19.22
  20.18
  21.19
  22.25
  23.37
  24.53
  25.76
  27.05
  28.40
PV of cash for distribution, $m
 
  7,921
  5,927
  5,445
  4,991
  4,559
  4,148
  3,754
  3,379
  3,020
  2,679
  1,987
  1,740
  1,508
  1,292
  1,094
  913
  752
  609
  485
  379
  290
  218
  160
  115
  80
  55
  36
  23
  15
  9
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

The Kraft Heinz Company is a food and beverage company. The Company is engaged in the manufacturing and marketing of food and beverage products, including condiments and sauces, cheese and dairy, meals, meats, refreshment beverages, coffee and other grocery products. The Company's segments include the United States, Canada and Europe. The Company's remaining businesses are combined as Rest of World. The Rest of World consists of Latin America and Asia, Middle East and Africa (AMEA). The Company provides products for various occasions whether at home, in restaurants or on the go. The Company's brands include Heinz, Kraft, Oscar Mayer, Philadelphia, Planters, Velveeta, Lunchables, Maxwell House, Capri Sun, and Ore-Ida. The Company's products are sold through its own sales organizations and through independent brokers, agents and distributors to chain, wholesale, cooperative and independent grocery accounts, convenience stores, drug stores, value stores, bakeries and pharmacies.

FINANCIAL RATIOS  of  Kraft Heinz (KHC)

Valuation Ratios
P/E Ratio 25.8
Price to Sales 3.5
Price to Book 1.6
Price to Tangible Book
Price to Cash Flow 17.9
Price to Free Cash Flow 23.5
Growth Rates
Sales Growth Rate 44.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 92.4%
Cap. Spend. - 3 Yr. Gr. Rate 43.9%
Financial Strength
Quick Ratio 2
Current Ratio 0.1
LT Debt to Equity 51.8%
Total Debt to Equity 56.5%
Interest Coverage 5
Management Effectiveness
Return On Assets 3.7%
Ret/ On Assets - 3 Yr. Avg. 2.5%
Return On Total Capital 4%
Ret/ On T. Cap. - 3 Yr. Avg. 2.4%
Return On Equity 5.9%
Return On Equity - 3 Yr. Avg. 3.9%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 38.9%
Gross Margin - 3 Yr. Avg. 34.5%
EBITDA Margin 28.5%
EBITDA Margin - 3 Yr. Avg. 18.6%
Operating Margin 23.2%
Oper. Margin - 3 Yr. Avg. 17.3%
Pre-Tax Margin 19%
Pre-Tax Margin - 3 Yr. Avg. 10.6%
Net Profit Margin 13.7%
Net Profit Margin - 3 Yr. Avg. 7.7%
Effective Tax Rate 27.5%
Eff/ Tax Rate - 3 Yr. Avg. 26.6%
Payout Ratio 103.6%

KHC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the KHC stock intrinsic value calculation we used $26487 million for the last fiscal year's total revenue generated by Kraft Heinz. The default revenue input number comes from 2016 income statement of Kraft Heinz. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our KHC stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 6.9%, whose default value for KHC is calculated based on our internal credit rating of Kraft Heinz, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Kraft Heinz.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of KHC stock the variable cost ratio is equal to 57%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $5375 million in the base year in the intrinsic value calculation for KHC stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 4.1% for Kraft Heinz.

Corporate tax rate of 27% is the nominal tax rate for Kraft Heinz. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the KHC stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for KHC are equal to 254.1%.

Life of production assets of 82.9 years is the average useful life of capital assets used in Kraft Heinz operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for KHC is equal to -8.5%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $57358 million for Kraft Heinz - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 1215.25 million for Kraft Heinz is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Kraft Heinz at the current share price and the inputted number of shares is $93.7 billion.

RELATED COMPANIES Price Int.Val. Rating
MDLZ Mondelez Inter 40.81 43.61  hold
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GIS General Mills 52.25 38.80  sell
PEP PepsiCo 111.95 59.66  sell
SJM J.M. Smucker 104.14 81.35  sell
MKC McCormick 99.14 85.93  hold
UN Unilever ADR 61.39 33.52  sell

COMPANY NEWS

▶ Unilever blames poor weather for slowing growth   [Oct-19-17 02:57AM  Reuters]
▶ More downside for consumer goods stocks?   [Oct-17-17 06:55PM  CNBC Videos]
▶ Kraft Heinz History: Everything Investors Need to Know   [Oct-14-17 06:46PM  Motley Fool]
▶ The 3 Best Buffett Stocks for Retirees   [06:39AM  Motley Fool]
▶ Why Doesn't Berkshire Just Buy More Apple?   [06:00AM  TheStreet.com]
▶ 3 High-Yield Warren Buffett Stocks   [07:03AM  Motley Fool]
▶ Buffett's Largest Stock Kraft Heinz Drops Near 52-Week Low   [Oct-06-17 06:30PM  GuruFocus.com]
▶ This Just In: Kraft Heinz Stock Upgraded   [01:59PM  Motley Fool]
▶ 52-Week Company Lows   [11:11AM  GuruFocus.com]
▶ Challenging the Kraft-Heinz Recipe   [12:33PM  Bloomberg]
▶ [$$] Kraft Heinz CIO Spends on AI, Robots to Cut Costs   [Oct-03-17 02:43PM  The Wall Street Journal]
▶ Kraft Heinz Stock Could Fall on Weak Sales   [Oct-02-17 07:39AM  Market Realist]
▶ Kraft Heinz Has the Right Recipe for Growth   [Oct-01-17 02:20PM  Motley Fool]
▶ 11 Most Popular Snacks In The World   [09:30AM  Insider Monkey]
▶ Kraft Heinz's New CFO Is Just 29   [Sep-23-17 12:23PM  TheStreet.com]
▶ Downgrade Makes Kraft Heinz More Distasteful   [Sep-20-17 05:00PM  TheStreet.com]
▶ Downgrade Makes Kraft Heinz More Distasteful   [02:57PM  TheStreet.com]
▶ [$$] Kraft Heinz Management Shake-up Illustrates 3G's Strategy   [Sep-17-17 08:46AM  The Wall Street Journal]
▶ Amazon's Grocery Threat Could Ramp Up Food M&A   [Sep-14-17 02:00PM  Bloomberg]
▶ 52-Week Company Lows   [11:06AM  GuruFocus.com]
▶ Bitcoin Doubts and Buffett Criticisms   [09:28AM  Bloomberg]
▶ [$$] Kraft Heinz Shakes Up Leadership   [Sep-08-17 11:43PM  The Wall Street Journal]
▶ [$$] Kraft Heinz Names 3G Capital Partner as CFO   [04:48PM  The Wall Street Journal]
▶ Kraft Heinz CFO, other execs to take new roles   [12:55PM  American City Business Journals]
▶ [$$] Kraft Heinz Shakes Up Leadership   [09:52AM  The Wall Street Journal]
▶ Kraft Heinz Announces Management Changes   [08:00AM  Business Wire]
▶ 52-Week Company Lows   [Sep-07-17 11:45AM  GuruFocus.com]
▶ Top Losers in the Consumer Sector: August 28September 1   [Sep-05-17 07:58AM  Market Realist]
▶ Food retailers flexing muscle   [01:15PM  Yahoo Finance Video]
▶ [$$] Big Food Faces Pressure From Retailers Demanding Discounts   [Aug-31-17 06:15PM  The Wall Street Journal]
▶ Better Buy: Mondelez International vs Kraft Heinz   [Aug-30-17 06:32PM  Motley Fool]
▶ Someone at Berkshire (Not Warren Buffett) Sold Apple Stock   [11:39AM  The Wall Street Journal]
Financial statements of KHC
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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