McCormick (MKC) has been drawing attention after a period of mixed share performance, with the stock higher over the past month but lower over the past three months and over the past year.
Short term momentum for McCormick has picked up, with a 1 month share price return of 5.87%. However, the stock is still down 29.71% on a year to date share price basis and long term total shareholder returns over 3 and 5 years have also declined.
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After a sharp reset in McCormick’s share price followed by a modest rebound in recent weeks, the key issue now is whether the current valuation still compensates you for the earnings and balance sheet risk on the table.
Most Popular Narrative: 14% Undervalued
Against McCormick’s last close of $47.29, the most followed narrative points to a fair value of about $54.85, leaving a double digit gap that hinges on how the Unilever Foods deal and margin targets play out.
Planned margin expansion and cash generation from the Unilever Foods acquisition, including US$600m of targeted net cost synergies with roughly two thirds expected by year two and a combined operating margin ambition of 23% to 25% by year three, create a visible path to higher operating profit and free cash flow conversion.
See why 26 investors see McCormick as 14% undervalued.
Result: Fair Value of $54.85 (UNDERVALUED)
Still, the McCormick narrative could be knocked off course if Consumer Americas volumes stay weak or if delays in integrating Unilever Foods slow the expected cost synergies.
Find out about the key risks to this McCormick narrative.
Next Steps
Mixed sentiment around McCormick is clear, so move quickly, walk through the data yourself, weigh the trade off, and review the 3 key rewards and 2 important warning signs.
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