McCormick & Co., Inc. – Value Analysis (NYSE:MKC) : May 3, 2017

Capitalcube gives McCormick & Co., Inc. a score of 78.

Our analysis is based on comparing McCormick & Co., Inc. with the following peers – TreeHouse Foods, Inc., Conagra Brands, Inc., Hain Celestial Group, Inc., PepsiCo, Inc., Pinnacle Foods, Inc., B&G Foods, Inc., Tyson Foods, Inc. Class A, Tiger Brands Limited Sponsored ADR and Naturex SA Sponsored ADR (THS-US, CAG-US, HAIN-US, PEP-US, PF-US, BGS-US, TSN-US, TBLMY-US and NTUXY-US).

Investment Outlook

McCormick & Co., Inc. has a fundamental score of 78 and has a relative valuation of OVERVALUED.

Fundamental Score

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Company Overview

  • From a peer analysis perspective, relative outperformance last month is up from a median performance last year.
  • It currently trades at a Price/Book ratio of (6.50).
  • MKC-US‘s operating performance is relatively good compared to its peers. The market currently does not expect high earnings growth relative to its peers but seems to expect the company to maintain its relatively high rates of return.
  • MKC-US has relatively high profit margins while operating with median asset turns.
  • Change in the company’s annual revenues seems to be coming at the expense of earnings.
  • MKC-US‘s return on assets currently and over the past five years suggest that its relatively high operating returns are sustainable.
  • The company’s relatively high gross and pre-tax margins suggest a differentiated product portfolio and tight control on operating costs relative to peers.
  • MKC-US‘s revenue growth in recent years and current P/E ratio are both around their respective peer medians suggesting that historical performance and long-term growth expectations for the company are largely in sync.
  • The company’s level of capital investment is relatively low and suggests it is milking the business.
  • MKC-US has the financial and operating capacity to borrow quickly.

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Leverage & Liquidity

MKC-US has the financial and operating capacity to borrow quickly.

  • With debt at a relatively low 12.22% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 21.13%), and a well-cushioned interest coverage level of 11.61x, MKC-US can probably borrow quickly. We classify the company as Quick & Able in terms of its capacity to raise additional debt.
  • All 9 peers for the company have an outstanding debt balance.

MKC-US has maintained its Quick & Able profile from the recent year-end.

  • MKC-US‘s interest coverage is its highest relative to the last five years and compares to a low of 10.01x in 2012.
  • Though its interest coverage has remained relatively stable at 11.61x compared to 2016, its peer median has decreased to 6.63x from 7.81x during this period.
  • Interest coverage rose 1.30 points relative to peers.
  • MKC-US‘s debt-EV is its highest relative to the last five years and compares to a low of 11.33% in 2016.
  • While its debt-EV increased to 12.22% from 11.33% (in 2016), its peer median decreased during this period to 21.13% from 21.71%.
  • Relative to peers, debt-EV rose 1.47 percentage points.

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Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
TreeHouse Foods, Inc. 40.97 2.25 2.99 20.33
Conagra Brands, Inc. 14.96 1.62 5.2 37.32
Hain Celestial Group, Inc. 18.26 2.6 8.64 27.54
PepsiCo, Inc. 21.13 1.25 8.06 25.85
Pinnacle Foods, Inc. 30.76 1.62 2.95 13.83
B&G Foods, Inc. 37.47 2.67 3.73 12.8
Tyson Foods, Inc. Class A 21.89 1.6 12.19 44.52
Tiger Brands Limited Sponsored ADR 3.86 1.71 18.76 94.7
Naturex SA Sponsored ADR N/A 2.32 5.04 24.23
McCormick & Company, Incorporated 12.22 0.8 11.61 34.98
Peer Median 21.13 1.66 6.63 26.69
Best In Class 3.86 2.67 18.76 94.7

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Company Profile

McCormick & Co., Inc. manufactures, markets and distributes spices, seasoning mixes, condiments and other flavorful products to the retail outlets, food manufacturers and foodservice businesses. The company operates its business through the following business segments: Consumer and Industrial. The Consumer business segment operates through the following brands McCormick, Lawry’s, Zatarain’s, Simply Asia, Thai Kitchen, Ducros, Vahine, Schwartz, Club House, Kamis, Kohinoor and DaQiao. The Industrial business segment sells to food manufacturers and the foodservice industry both directly and indirectly through distributors. McCormick was founded by Willoughby M. McCormick in 1889 and is headquartered in Sparks, MD.


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