Is Mondelez International (MDLZ) Offering Value After Recent Share Price Weakness

• If you are wondering whether Mondelez International's current share price offers good value or is pricing in too much optimism, you are not alone.
• The stock recently closed at US$51.51, with returns of a 4.3% decline over the last 7 days, a 5.9% decline over 30 days and a 4.0% decline year to date, adding to an 8.8% decline over 1 year and a modest 1.8% gain over 5 years.
• Recent coverage around Mondelez has focused on its role as a large global snacks and confectionery company, with investors watching how consumer demand and cost pressures affect sentiment toward consumer staples. This backdrop helps explain why some investors are reassessing what they are willing to pay for defensive brands versus other parts of the market.
• In that context, Mondelez currently holds a value score of 6/6. This means it screens as undervalued on all six checks we use. We will walk through those valuation approaches shortly, then finish by looking at a more holistic way to think about what the stock might be worth.

Mondelez International delivered -8.8% returns over the last year. See how this stacks up to the rest of the Food industry.

Approach 1: Mondelez International Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model estimates what a company might be worth today by projecting its future cash flows and discounting those back into present value terms. It is essentially asking what you would pay now for all the cash the business is expected to generate in the future.

For Mondelez International, the model used is a 2 Stage Free Cash Flow to Equity approach. The latest twelve month free cash flow is about $2.31b. Analysts provide explicit free cash flow estimates out to 2028, where free cash flow is projected at $4.94b. Beyond that, Simply Wall St extrapolates cash flows out to 2035, with annual forecasts in the $3.76b to $7.66b range before discounting back to today.

Putting these projections together, the DCF model arrives at an estimated intrinsic value of about $115.67 per share. Compared with the recent share price of $51.51, this implies the stock screens as 55.5% undervalued on this method.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Mondelez International is undervalued by 55.5%. Track this in your watchlist or portfolio, or discover 883 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Mondelez International.

Approach 2: Mondelez International Price vs Earnings

For a profitable company like Mondelez, the P/E ratio is a useful shorthand for how much you are paying for each dollar of current earnings. Investors usually accept a higher P/E when they expect stronger earnings growth or see the business as lower risk, and a lower P/E when they see more risk or limited growth.

Mondelez currently trades on a P/E of 18.82x. That sits slightly below the Food industry average of 19.89x and also below a peer group average of 25.08x. On the surface, that points to a lower earnings multiple than many similar companies.

Simply Wall St also calculates a “Fair Ratio”, which is the P/E level that might be reasonable for Mondelez given factors like its earnings growth profile, industry, profit margins, market cap and specific risks. For Mondelez, this Fair Ratio is 21.68x. This type of metric can be more informative than a simple peer or industry comparison because it tries to adjust for company specific characteristics rather than assuming all Food companies should trade at the same multiple.

With the current P/E of 18.82x sitting below the Fair Ratio of 21.68x, the stock screens as undervalued using this approach.

Result: UNDERVALUED

P/E ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1446 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Mondelez International Narrative

Earlier we mentioned that there is an even better way to understand valuation. Let us introduce you to Narratives, where you combine your view of Mondelez International’s story with your own assumptions for future revenue, earnings and margins. You then link that to a forecast and a fair value, and easily compare that fair value to today’s price on Simply Wall St’s Community page. This page updates automatically when fresh news or earnings arrive. One investor might build a bullish Mondelez Narrative around the US$88.00 price target and another a more cautious one around US$67.00, and you can see exactly how each story translates into numbers and a decision framework that fits your own expectations.

Do you think there's more to the story for Mondelez International? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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