Stock Analysis on Net

Mondelēz International Inc. (NASDAQ:MDLZ)

Present Value of Free Cash Flow to the Firm (FCFF)

Microsoft Excel

In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Free cash flow to the firm (FCFF) is generally described as cash flows after direct costs and before any payments to capital suppliers.


Intrinsic Stock Value (Valuation Summary)

Mondelēz International Inc., free cash flow to the firm (FCFF) forecast

US$ in millions, except per share data

Microsoft Excel
Year Value FCFFt or Terminal value (TVt) Calculation Present value at 8.54%
01 FCFF0 3,859
1 FCFF1 4,015 = 3,859 × (1 + 4.06%) 3,699
2 FCFF2 4,187 = 4,015 × (1 + 4.27%) 3,554
3 FCFF3 4,375 = 4,187 × (1 + 4.49%) 3,421
4 FCFF4 4,581 = 4,375 × (1 + 4.71%) 3,300
5 FCFF5 4,806 = 4,581 × (1 + 4.92%) 3,190
5 Terminal value (TV5) 139,365 = 4,806 × (1 + 4.92%) ÷ (8.54%4.92%) 92,512
Intrinsic value of Mondelēz International Inc. capital 109,678
Less: Debt (fair value) 17,506
Intrinsic value of Mondelēz International Inc. common stock 92,172
 
Intrinsic value of Mondelēz International Inc. common stock (per share) $68.45
Current share price $70.10

Based on: 10-K (reporting date: 2023-12-31).

Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.


Weighted Average Cost of Capital (WACC)

Mondelēz International Inc., cost of capital

Microsoft Excel
Value1 Weight Required rate of return2 Calculation
Equity (fair value) 94,388 0.84 9.82%
Debt (fair value) 17,506 0.16 1.63% = 2.19% × (1 – 25.60%)

Based on: 10-K (reporting date: 2023-12-31).

1 US$ in millions

   Equity (fair value) = No. shares of common stock outstanding × Current share price
= 1,346,477,411 × $70.10
= $94,388,066,511.10

   Debt (fair value). See details »

2 Required rate of return on equity is estimated by using CAPM. See details »

   Required rate of return on debt. See details »

   Required rate of return on debt is after tax.

   Estimated (average) effective income tax rate
= (26.10% + 26.80% + 27.20% + 36.20% + 22.30%) ÷ 5
= 25.60%

WACC = 8.54%


FCFF Growth Rate (g)

FCFF growth rate (g) implied by PRAT model

Mondelēz International Inc., PRAT model

Microsoft Excel
Average Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
Selected Financial Data (US$ in millions)
Interest expense, debt 550 428 365 423 484
Net earnings attributable to Mondelēz International 4,959 2,717 4,300 3,555 3,870
 
Effective income tax rate (EITR)1 26.10% 26.80% 27.20% 36.20% 22.30%
 
Interest expense, debt, after tax2 406 313 266 270 376
Add: Cash dividends declared 2,209 2,025 1,867 1,718 1,576
Interest expense (after tax) and dividends 2,615 2,338 2,133 1,988 1,952
 
EBIT(1 – EITR)3 5,365 3,030 4,566 3,825 4,246
 
Short-term borrowings 420 2,299 216 29 2,638
Current portion of long-term debt 2,101 383 1,746 2,741 1,581
Long-term debt, excluding current portion 16,887 20,251 17,550 17,276 14,207
Total Mondelēz International shareholders’ equity 28,332 26,883 28,269 27,578 27,275
Total capital 47,740 49,816 47,781 47,624 45,701
Financial Ratios
Retention rate (RR)4 0.51 0.23 0.53 0.48 0.54
Return on invested capital (ROIC)5 11.24% 6.08% 9.56% 8.03% 9.29%
Averages
RR 0.46
ROIC 8.84%
 
FCFF growth rate (g)6 4.06%

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

1 See details »

2023 Calculations

2 Interest expense, debt, after tax = Interest expense, debt × (1 – EITR)
= 550 × (1 – 26.10%)
= 406

3 EBIT(1 – EITR) = Net earnings attributable to Mondelēz International + Interest expense, debt, after tax
= 4,959 + 406
= 5,365

4 RR = [EBIT(1 – EITR) – Interest expense (after tax) and dividends] ÷ EBIT(1 – EITR)
= [5,3652,615] ÷ 5,365
= 0.51

5 ROIC = 100 × EBIT(1 – EITR) ÷ Total capital
= 100 × 5,365 ÷ 47,740
= 11.24%

6 g = RR × ROIC
= 0.46 × 8.84%
= 4.06%


FCFF growth rate (g) implied by single-stage model

g = 100 × (Total capital, fair value0 × WACC – FCFF0) ÷ (Total capital, fair value0 + FCFF0)
= 100 × (111,894 × 8.54%3,859) ÷ (111,894 + 3,859)
= 4.92%

where:

Total capital, fair value0 = current fair value of Mondelēz International Inc. debt and equity (US$ in millions)
FCFF0 = the last year Mondelēz International Inc. free cash flow to the firm (US$ in millions)
WACC = weighted average cost of Mondelēz International Inc. capital


FCFF growth rate (g) forecast

Mondelēz International Inc., H-model

Microsoft Excel
Year Value gt
1 g1 4.06%
2 g2 4.27%
3 g3 4.49%
4 g4 4.71%
5 and thereafter g5 4.92%

where:
g1 is implied by PRAT model
g5 is implied by single-stage model
g2, g3 and g4 are calculated using linear interpoltion between g1 and g5

Calculations

g2 = g1 + (g5g1) × (2 – 1) ÷ (5 – 1)
= 4.06% + (4.92%4.06%) × (2 – 1) ÷ (5 – 1)
= 4.27%

g3 = g1 + (g5g1) × (3 – 1) ÷ (5 – 1)
= 4.06% + (4.92%4.06%) × (3 – 1) ÷ (5 – 1)
= 4.49%

g4 = g1 + (g5g1) × (4 – 1) ÷ (5 – 1)
= 4.06% + (4.92%4.06%) × (4 – 1) ÷ (5 – 1)
= 4.71%