Would Ben Graham Have Added Mondelez International (MDLZ) To His Portfolio?

Mondelez International does not have the profile of a defensive investment based on the requirements of Ben Graham. The Packaged Foods firm may nonetheless be of interest to more risk-oriented investors who have a solid thesis on the company's future growth. At Market Inference, we remain agnostic as to such further developments, and prefer to use a company's past track record as the bellwether for future potential gains.

Mondelez International Is Probably Overvalued

Graham devised the below equation to give investors a quick way of determining whether a stock is trading at a fair multiple of its earnings and its assets:

√(22.5 * 4 year average earnings per share (2.77) * 4 year average book value per share (19.682) = $35.02

At today's price of $75.14 per share, Mondelez International is now trading 114.6% above the maximum price that Graham would have wanted to pay for the stock.

Even though the stock does not trade at an attractive multiple, it might still meet some of the other criteria for quality stocks that Graham listed in Chapter 14 of The Intelligent Investor.

Positive Retained Earnings From 2008 To 2022, A Solid Record Of Dividends, and Some Eps Growth

Ben Graham wrote that an investment in a company with a record of positive retained earnings could contribute significantly to the margin of safety. Mondelez International had positive retained earnings from 2008 to 2022 with an average of $20.51 Billion over this period.

Another one of Graham's requirements is for a 30% or more cumulative growth rate of the company's earnings per share over the last ten years.Mondelez International's earnings per share growth will be calculated using the average EPS of the years 2007, 2008, and 2009, and the average of the years 2020, 2021, and 2022. For the years starting in 2007, we have EPS values of $1.70, $1.90, and $2.03, which give us an average of $1.88. From 2020 to the present, we have EPS values of $0.80, $3.04, and $1.96, which average out to $1.93. The growth rate between the two averages is 2.66%, which falls short of Graham's 30% requirement while remaining positive.

We have no record of Mondelez International offering a regular dividend.

Negative Current Asset to Liabilities Balance and Not Enough Current Assets to Cover Current Liabilities

Graham sought companies with extremely low debt levels compared to their assets. For one, he expected their current ratio to be over 2 and their long term debt to net current asset ratio to be near, or ideally under, under 1. Mondelez International fails on both counts with a current ratio of 0.6 and a debt to net current asset ratio of -0.6.


According to Graham's analysis, Mondelez International is likely a company of average quality, which does not offer a significant enough margin of safety for a risk averse investor.

2020-02-07 2021-02-05 2022-02-04 2023-02-03
Revenue (MM) $25,868 $26,581 $28,720 $31,496
Gross Margins 40.0% 39.3% 39.2% 35.9%
Operating Margins 15.6% 15.6% 16.9% 12.0%
Net Margins 15.19% 13.37% 14.97% 8.63%
Net Income (MM) $3,929 $3,555 $4,300 $2,717
Net Interest Expense (MM) -$456 -$608 -$447 -$423
Depreciation & Amort. (MM) -$1,047 -$1,116 -$1,113 -$1,107
Earnings Per Share $2.69 $2.47 $3.06 $2.87
EPS Growth n/a -8.18% 23.89% -6.21%
Diluted Shares (MM) 1,458 1,441 1,405 1,362
Free Cash Flow (MM) $4,808 $4,827 $5,106 $4,814
Capital Expenditures (MM) -$843 -$863 -$965 -$906
Net Current Assets (MM) -$29,568 -$30,177 -$28,427 -$34,150
Current Ratio 0.5 0.66 0.74 0.6
Long Term Debt (MM) $14,207 $17,276 $17,550 $20,251
Net Debt / EBITDA 3.16 4.05 3.42 6.21
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.