International Flavors & Fragrances Inc.IFFNYSE
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DCF Valuation
DCF Valuation Summary
Sell
Fair Value: $69.77 per share(market-calibrated)
-10.9%
Upside to Fair Value
Current
$78.31
Pure Model
$68.92
Fair Value
$69.77
Bull Case
$85.13
Bear Case
$54.42
Market Reality Check
Model Terminal Growth
2.25%
Market-Implied Growth
3.15%
Calibrated Growth
2.39%
Fair value uses 85% model / 15% market-implied terminal growth. Pure model: $68.92.
What's Driving This Ratingfor IFF
↓
CapEx normalizing toward maintenance
Historical CapEx is 4.53% of revenue (heavy investment phase). Model fades this to 4.00% by Year 10, freeing up ~$73M in annual FCF. This is the biggest driver of long-term cash flow improvement.
↑
Margin expansion modeled
Current EBIT margin is -1.48% — below the sector mature average of 13.00%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $1.4B (9.96% margin).
→
Moderate revenue growth
Analyst consensus projects -1.63% revenue growth, fading to 2.25% by Year 10. Revenue reaches $13.7B (vs $10.9B today).
✓
Model and market roughly agree
Market-implied terminal growth of 3.15% is close to the model's 2.25% (only 90bps apart). The DCF assumptions are well-aligned with how the market is pricing this stock.
✓
Strong cash flow conversion
Year 10 FCF/EBITDA conversion of 66.31% indicates efficient cash generation. FCF reaches $1.8B by Year 10 (13.25% FCF margin).
Weighted Average Cost of Capital (WACC)
Cost of Equity (CAPM)
Risk-Free Rate (Rf)4.50%
Beta (β)1.00
Market Risk Premium4.50%
*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)
Cost of Equity (Re)9.02%
Cost of Debt
Pre-tax Cost of Debt4.63%
Tax Rate21.00%
After-tax Cost of Debt3.66%
Equity Weight (E/V)75.09%
Debt Weight (D/V)24.91%
WACC Calculation
WACC = (E/V × Re) + (D/V × Rd × (1-Tc))
WACC = (75.09% × 9.02%) + (24.91% × 3.66%)
= 7.69%
10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)
| Year | Year 1 | Year 3 | Year 5 | Year 7 | Year 10 |
|---|---|---|---|---|---|
| Revenue | $10.7B | $11.6B | $12.2B | $12.8B | $13.7B |
| EBIT | -$159M | -$172M | $456M | $904M | $1.4B |
| Tax | -$33M | -$36M | $96M | $190M | $286M |
| NOPAT | -$126M | -$136M | $360M | $714M | $1.1B |
| + Depreciation | $1.1B | $1.2B | $1.2B | $1.3B | $1.4B |
| - Capex | $486M | $510M | $525M | $534M | $547M |
| - Δ NWC | -$52M | $151M | $78M | $82M | $87M |
| Free Cash Flow | $513M | $362M | $982M | $1.4B | $1.8B |
| Discount Factor | 0.929 | 0.801 | 0.691 | 0.596 | 0.477 |
| Present Value | $477M | $290M | $678M | $821M | $864M |
FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital
Terminal Value Calculation
Perpetuity Growth Method
Year 10 FCF$1.8B
Terminal Growth Rate2.25%
WACC7.69%
TV = FCF₁₀ × (1+g) / (WACC-g)
Terminal Value$34.1B
PV of Terminal Value$16.2B
Exit Multiple Method
Year 10 EBITDA$2.7B
Exit Multiple (EV/EBITDA)14.0x
TV = EBITDA₁₀ × Exit Multiple
Terminal Value$38.2B
PV of Terminal Value$18.2B
Valuation Summary
Perpetuity Growth Method
PV of Projected FCFs$6.5B
PV of Terminal Value$16.2B
Enterprise Value$22.7B
(-) Net Debt$6.1B
Equity Value$16.6B
Shares Outstanding256M
Price per Share$65.04
Exit Multiple Method
PV of Projected FCFs$6.5B
PV of Terminal Value$18.2B
Enterprise Value$24.7B
(-) Net Debt$6.1B
Equity Value$18.6B
Shares Outstanding256M
Price per Share$72.80
Pure Model Fair Value
$68.92
Average of perpetuity growth and exit multiple methods (before market calibration)
Sensitivity AnalysisPrice per Share
| WACC ↓ / Growth → | 1.25% | 1.75% | 2.25% | 2.75% | 3.25% |
|---|---|---|---|---|---|
| 5.69% | $94.21 | $100.37 | $108.32 | $118.98 | $134.02 |
| 6.69% | $76.71 | $80.40 | $84.91 | $90.57 | $97.88 |
| 7.69% | $63.73 | $66.10 | $68.92 | $72.31 | $76.45 |
| 8.69% | $53.55 | $55.17 | $57.05 | $59.23 | $61.82 |
| 9.69% | $45.29 | $46.44 | $47.74 | $49.23 | $50.96 |
How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.
Scenario Analysis
Bear Case
$54.42
-30.5% vs current
- • -25% vs analyst consensus
- • Terminal growth: 2.0%
- • Beta: 1.26
Base Case
$68.92
-12.0% vs current
- • Analyst consensus
- • Terminal growth: 2.3%
- • Beta: 1.00
Bull Case
$85.13
8.7% vs current
- • +25% vs analyst consensus
- • Terminal growth: 2.8%
- • Beta: 0.85
Key Assumptions & Drivers• Basic Materials Sector
Growth Assumptions (Select Years)
Year 1 Revenue Growth-1.63%
Year 3 Revenue Growth4.70%
Year 5 Revenue Growth2.25%
Year 7 Revenue Growth2.25%
Year 10 Revenue Growth2.25%
Terminal Growth Rate2.25%
Margin & Efficiency
Current EBIT Margin-1.48%
Terminal EBIT Margin13.00%
Tax Rate21.00%
Historical Capex / Rev4.53%
Terminal Capex / Rev4.00%
NWC / Revenue29.03%
Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.
Institutional-Grade Methodology
Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta
Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 14x EV/EBITDA (Basic Materials sector)
This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.