The Kraft Heinz Company - NASDAQGS:KHC - Comprehensive analysis
Trading at approximately a 45% discount to our $53 fair value estimate and offering a 5% annual dividend yield, narrow-moat Kraft Heinz should be considered by investors, in our view. We believe market skepticism is focused on the firm's ability to avoid significant and lasting volume declines amid ongoing cost pressures, reduced consumer spending, and increased competition following recent price increases. However, we contend that this skepticism is misplaced, as the company has moved away from previous management's focus on short-term profitability and cash flow. Since mid-2019, Kraft Heinz has strategically pursued sustainable efficiencies, increased brand investment (with spending on product innovation and marketing at a mid-single-digit percentage of sales, aligning more closely with industry peers), improved its category management and e-commerce capabilities, and utilized its scale to adapt more effectively to changing market dynamics. We are confident in the firm's commitment to this strategy. We anticipate that these efforts will allow the company to achieve low-single-digit annual sales growth while maintaining operating margins in the low 20s.
Free evaluation through quantitative algorithms The Kraft Heinz Company - NASDAQGS:KHC
Growth-Scoring Model Detail
Total Revenue Growth Over Prior Year | -2.98 | Market 13 Sector 15 |
Gross Profit Growth Over Prior Year | -0.08 | Market 27 Sector 25 |
EBITDA Growth Over Prior Year | 4.24 | Market 44 Sector 45 |
EBITA Growth Over Prior Year | 5.04 | Market 42 Sector 50 |
EBIT Growth Over Prior Year | 5.26 | Market 46 Sector 50 |
Earnings from Cont. Ops. Growth Over Prior Year | -3.51 | Market 35 Sector 48 |
Net Income Growth Over Prior Year | -3.89 | Market 36 Sector 49 |
Normalized Net Income Growth Over Prior Year | 1.99 | Market 39 Sector 42 |
Diluted EPS before Extra Growth Over Prior Year | -2.16 | Market 35 Sector 46 |
A/R Growth Over Prior Year | 1.66 | Market 43 Sector 48 |
Inventory Growth Over Prior Year | -6.59 | Market 11 Sector 18 |
PPE Net Growth Over Prior Year | -0.07 | Market 33 Sector 32 |
Total Assets Growth Over Prior Year | -2.27 | Market 21 Sector 22 |
Tangible Book Value Growth Over Prior Year | 0 | Market 0 Sector 0 |
Common Equity Growth Over Prior Year | -0.69 | Market 36 Sector 37 |
Cash from Ops. Growth Over Prior Year | 5.23 | Market 54 Sector 62 |
CAPEX Growth Over Prior Year | 1.09 | Market 51 Sector 53 |
Dividend per Share Growth Over Prior Year | 0 | Market 45 Sector 35 |
Levered Free Cash Flow Growth Over Prior Year | -10.24 | Market 34 Sector 52 |
Unlevered Free Cash Flow Growth Over Prior Year | -8.29 | Market 31 Sector 45 |
Profitability-Scoring Model Detail
Gross Margin % | 34.7 | Market 51 Sector 76 |
SG&A Margin % | 13.38 | Market 40 Sector 34 |
EBITDA Margin % | 25 | Market 78 Sector 96 |
EBITA Margin % | 22.3 | Market 79 Sector 96 |
EBIT Margin % | 21.4 | Market 79 Sector 96 |
Earnings from Cont. Ops Margin % | 10.62 | Market 64 Sector 89 |
Net Income Margin % | 10.62 | Market 66 Sector 92 |
Net Income Avail. for Common Margin % | 10.62 | Market 66 Sector 92 |
Normalized Net Income Margin % | 11.18 | Market 78 Sector 96 |
Levered Free Cash Flow Margin % | 8.43 | Market 58 Sector 83 |
Unlevered Free Cash Flow Margin % | 10.64 | Market 61 Sector 83 |
Return on Assets % | 3.86 | Market 17 Sector 32 |
Return on Capital % | 4.92 | Market 19 Sector 36 |
Return on Equity % | 5.54 | Market 20 Sector 27 |
Return on Common Equity % | 5.56 | Market 22 Sector 27 |
Total Asset Turnover | 0.29 | Market 7 Sector 5 |
