Key Things to Know About KHC Stock for 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.

The Market May Be Undervaluing Kraft Heinz's Assets and Equity:

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 21.21 and an average price to book (P/B) ratio of 4.12. In contrast, Kraft Heinz has a trailing 12 month P/E ratio of 15.3 and a P/B ratio of 0.92.

Kraft Heinz's PEG ratio is 2.42, 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.

The Business Has Weak Operating Margins:

2018 2019 2020 2021 2022 2023
Revenue (MM) $26,268 $24,977 $26,185 $26,042 $26,485 $27,161
Revenue Growth n/a -4.91% 4.84% -0.55% 1.7% 2.55%
Net Margins -39% 8% 1% 4% 9% 11%
Net Income (MM) -$10,192 $1,935 $356 $1,012 $2,363 $2,988
Net Interest Expense (MM) $1,284 $1,361 $1,394 $2,047 $921 $900
Depreciation & Amort. (MM) $983 $994 $969 $910 $933 $958
Earnings Per Share -$8.36 $1.58 $0.29 $0.82 $1.91 $2.42
EPS Growth n/a 118.9% -81.65% 182.76% 132.93% 26.7%
Diluted Shares (MM) 1,219 1,224 1,228 1,236 1,235 1,235
Free Cash Flow (MM) $1,748 $2,784 $4,333 $4,459 $1,553 $2,509
Capital Expenditures (MM) $826 $768 $596 $905 $916 $1,063
Current Ratio 1.21 1.03 1.34 0.99 0.87 1.0
Total Debt (MM) $31,147 $29,238 $28,300 $21,801 $20,064 $19,270
Net Debt / EBITDA -3.25 6.63 8.03 4.2 4.17 3.34

Kraft Heinz's financial statements include several red flags such as weak operating margins with a positive growth rate, positive cash flows, and not enough current assets to cover current liabilities. Additionally, the firm has a highly leveraged balance sheet. On the other hand, the company benefits from weak revenue growth and increasing reinvestment in the business and positive EPS growth.

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.