Stock Analysis on Net

Kimberly-Clark Corp. (NYSE:KMB)

This company has been moved to the archive! The financial data has not been updated since April 23, 2021.

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)

Kimberly-Clark Corp., 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 7.97%
01 FCFF0 2,731
1 FCFF1 2,951 = 2,731 × (1 + 8.06%) 2,733
2 FCFF2 3,151 = 2,951 × (1 + 6.75%) 2,702
3 FCFF3 3,322 = 3,151 × (1 + 5.44%) 2,639
4 FCFF4 3,459 = 3,322 × (1 + 4.12%) 2,545
5 FCFF5 3,556 = 3,459 × (1 + 2.81%) 2,423
5 Terminal value (TV5) 70,863 = 3,556 × (1 + 2.81%) ÷ (7.97%2.81%) 48,286
Intrinsic value of Kimberly-Clark Corp. capital 61,328
Less: Debt (fair value) 9,850
Intrinsic value of Kimberly-Clark Corp. common stock 51,478
 
Intrinsic value of Kimberly-Clark Corp. common stock (per share) $152.56
Current share price $132.11

Based on: 10-K (reporting date: 2020-12-31).

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)

Kimberly-Clark Corp., cost of capital

Microsoft Excel
Value1 Weight Required rate of return2 Calculation
Equity (fair value) 44,578 0.82 9.19%
Debt (fair value) 9,850 0.18 2.46% = 3.27% × (1 – 24.68%)

Based on: 10-K (reporting date: 2020-12-31).

1 US$ in millions

   Equity (fair value) = No. shares of common stock outstanding × Current share price
= 337,431,588 × $132.11
= $44,578,087,090.68

   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
= (23.10% + 21.70% + 19.60% + 28.40% + 30.60%) ÷ 5
= 24.68%

WACC = 7.97%


FCFF Growth Rate (g)

FCFF growth rate (g) implied by PRAT model

Kimberly-Clark Corp., PRAT model

Microsoft Excel
Average Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016
Selected Financial Data (US$ in millions)
Interest expense 252 261 263 318 319
Net income attributable to Kimberly-Clark Corporation 2,352 2,157 1,410 2,278 2,166
 
Effective income tax rate (EITR)1 23.10% 21.70% 19.60% 28.40% 30.60%
 
Interest expense, after tax2 194 204 211 228 221
Add: Dividends declared 1,458 1,415 1,391 1,371 1,322
Interest expense (after tax) and dividends 1,652 1,619 1,602 1,599 1,543
 
EBIT(1 – EITR)3 2,546 2,361 1,621 2,506 2,387
 
Debt payable within one year 486 1,534 1,208 953 1,133
Long-term debt, excluding payable within one year 7,878 6,213 6,247 6,472 6,439
Total Kimberly-Clark Corporation stockholders’ equity 626 (33) (287) 629 (102)
Total capital 8,990 7,714 7,168 8,054 7,470
Financial Ratios
Retention rate (RR)4 0.35 0.31 0.01 0.36 0.35
Return on invested capital (ROIC)5 28.32% 30.61% 22.62% 31.11% 31.96%
Averages
RR 0.28
ROIC 28.92%
 
FCFF growth rate (g)6 8.06%

Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).

1 See details »

2020 Calculations

2 Interest expense, after tax = Interest expense × (1 – EITR)
= 252 × (1 – 23.10%)
= 194

3 EBIT(1 – EITR) = Net income attributable to Kimberly-Clark Corporation + Interest expense, after tax
= 2,352 + 194
= 2,546

4 RR = [EBIT(1 – EITR) – Interest expense (after tax) and dividends] ÷ EBIT(1 – EITR)
= [2,5461,652] ÷ 2,546
= 0.35

5 ROIC = 100 × EBIT(1 – EITR) ÷ Total capital
= 100 × 2,546 ÷ 8,990
= 28.32%

6 g = RR × ROIC
= 0.28 × 28.92%
= 8.06%


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

g = 100 × (Total capital, fair value0 × WACC – FCFF0) ÷ (Total capital, fair value0 + FCFF0)
= 100 × (54,428 × 7.97%2,731) ÷ (54,428 + 2,731)
= 2.81%

where:

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


FCFF growth rate (g) forecast

Kimberly-Clark Corp., H-model

Microsoft Excel
Year Value gt
1 g1 8.06%
2 g2 6.75%
3 g3 5.44%
4 g4 4.12%
5 and thereafter g5 2.81%

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)
= 8.06% + (2.81%8.06%) × (2 – 1) ÷ (5 – 1)
= 6.75%

g3 = g1 + (g5g1) × (3 – 1) ÷ (5 – 1)
= 8.06% + (2.81%8.06%) × (3 – 1) ÷ (5 – 1)
= 5.44%

g4 = g1 + (g5g1) × (4 – 1) ÷ (5 – 1)
= 8.06% + (2.81%8.06%) × (4 – 1) ÷ (5 – 1)
= 4.12%