Fundamental Facts for Kraft Heinz Investors

We've been asking ourselves recently if the market has placed a fair valuation on Kraft Heinz. Let's dive into some of the fundamental values of this large-cap Consumer Staples company to determine if there might be an opportunity here for value-minded investors.

An Exceptionally Low P/B ratio but Trades Above Its Graham Number:

The Kraft Heinz Company, together with its subsidiaries, manufactures and markets food and beverage products in the United States, Canada, the United Kingdom, and internationally. The company belongs to the Consumer Staples sector, which has an average price to earnings (P/E) ratio of 24.36 and an average price to book (P/B) ratio of 4.29. In contrast, Kraft Heinz has a trailing 12 month P/E ratio of 18.7 and a P/B ratio of 0.92.

Kraft Heinz's PEG ratio is 2.74, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.

Exceptional Profitability Overshadowed by Excessive Leverage:

2019-12-31 2020-12-31 2021-12-31 2022-12-31
Revenue (MM) $24,977 $26,185 $26,042 $26,485
Gross Margins 32.6% 35.0% 33.3% 30.7%
Operating Margins 19.9% 21.1% 19.6% 17.2%
Net Margins 7.75% 1.36% 3.89% 8.92%
Net Income (MM) $1,935 $356 $1,012 $2,363
Net Interest Expense (MM) -1,361 -1,394 -2,047 -921
Net Interest Expense (MM) -$1,361 -$1,394 -$2,047 -$921
Depreciation & Amort. (MM) -$994 -$969 -$910 -$933
Earnings Per Share $1.58 $0.29 $0.82 $1.97
EPS Growth n/a -81.65% 182.76% 140.24%
Diluted Shares (MM) 1,224 1,228 1,236 1,227
Free Cash Flow (MM) $2,784 $4,333 $4,459 $1,553
Capital Expenditures (MM) -$768 -$596 -$905 -$916
Net Current Assets (MM) -$41,604 -$38,765 -$34,948 -$33,746
Current Ratio 1.03 1.34 0.99 0.87
Long Term Debt (MM) $28,216 $28,070 $21,061 $19,233
Net Debt / EBITDA 5.37 7.35 3.95 3.95

Kraft Heinz benefits from stable revenues and increasing reinvestment in the business, strong margins with a stable trend, and wider gross margins than its peer group. The company's financial statements show positive EPS growth and consistent free cash flow. However, the firm has a highly leveraged balance sheet.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.