McCormick & Company, IncorporatedMKCNYSE

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DCF Valuation

DCF Valuation Summary

Buy

Fair Value: $84.12 per share(market-calibrated)

+24.3%

Upside to Fair Value

Current

$67.67

Pure Model

$86.09

Fair Value

$84.12

Bull Case

$107.87

Bear Case

$67.93

Market Reality Check

Model Terminal Growth

2.50%

Market-Implied Growth

1.54%

Calibrated Growth

2.26%

Fair value uses 75% model / 25% market-implied terminal growth. Pure model: $86.09.

What's Driving This Ratingfor MKC

↓

CapEx normalizing toward maintenance

Historical CapEx is 3.80% of revenue (heavy investment phase). Model fades this to 3.00% by Year 10, freeing up ~$81M in annual FCF. This is the biggest driver of long-term cash flow improvement.

⚠

Analyst growth decelerates sharply

Revenue growth drops from 14.77% in Year 1 to 2.69% by Year 5 (per analyst consensus). This growth deceleration is a key reason the model may undervalue the stock if growth re-accelerates.

✓

Model and market roughly agree

Market-implied terminal growth of 1.54% is close to the model's 2.50% (only 96bps 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 67.19% indicates efficient cash generation. FCF reaches $1.3B by Year 10 (12.73% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.57

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)7.08%

Cost of Debt

Pre-tax Cost of Debt4.50%

Tax Rate19.87%

After-tax Cost of Debt3.61%

Equity Weight (E/V)81.98%

Debt Weight (D/V)18.02%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (81.98% × 7.08%) + (18.02% × 3.61%)

= 6.46%

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	$7.9B	$8.5B	$8.9B	$9.4B	$10.1B
EBIT	$1.2B	$1.3B	$1.4B	$1.5B	$1.6B
Tax	$247M	$267M	$281M	$297M	$321M
NOPAT	$998M	$1.1B	$1.1B	$1.2B	$1.3B
+ Depreciation	$236M	$254M	$267M	$282M	$304M
- Capex	$299M	$307M	$307M	$307M	$304M
- Δ NWC	$20M	$6M	$5M	$5M	$5M
Free Cash Flow	$914M	$1.0B	$1.1B	$1.2B	$1.3B
Discount Factor	0.939	0.829	0.731	0.645	0.535
Present Value	$859M	$844M	$796M	$753M	$689M

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$1.3B

Terminal Growth Rate2.50%

WACC6.46%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$33.4B

PV of Terminal Value$17.9B

Exit Multiple Method

Year 10 EBITDA$1.9B

Exit Multiple (EV/EBITDA)20.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$38.4B

PV of Terminal Value$20.5B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$7.8B

PV of Terminal Value$17.9B

Enterprise Value$25.7B

(-) Net Debt$3.9B

Equity Value$21.8B

Shares Outstanding269M

Price per Share$81.13

Exit Multiple Method

PV of Projected FCFs$7.8B

PV of Terminal Value$20.5B

Enterprise Value$28.4B

(-) Net Debt$3.9B

Equity Value$24.5B

Shares Outstanding269M

Price per Share$91.04

Pure Model Fair Value

$86.09

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	1.50%	2.00%	2.50%	3.00%	3.50%
4.46%	$117.20	$128.35	$142.85	$136.56	$130.57
5.46%	$94.31	$99.74	$107.02	$117.26	$130.57
6.46%	$79.12	$82.21	$86.09	$91.08	$97.77
7.46%	$67.95	$69.88	$72.21	$75.05	$78.61
8.46%	$59.20	$60.49	$61.99	$63.77	$65.91

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

$67.93

0.4% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 0.72

Base Case

$86.09

27.2% vs current

• Analyst consensus
• Terminal growth: 2.5%
• Beta: 0.57

Bull Case

$107.87

59.4% vs current

• +25% vs analyst consensus
• Terminal growth: 3.0%
• Beta: 0.49

Key Assumptions & Drivers✓ Using Analyst Consensus Estimates• Consumer Defensive Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth14.77%

Year 3 Revenue Growth3.74%

Year 5 Revenue Growth2.69%

Year 7 Revenue Growth2.61%

Year 10 Revenue Growth2.50%

Terminal Growth Rate2.50%

Margin & Efficiency

Current EBIT Margin15.86%

Terminal EBIT Margin16.00%

Tax Rate19.87%

Historical Capex / Rev3.80%

Terminal Capex / Rev3.00%

NWC / Revenue2.01%

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: 20x EV/EBITDA (Consumer Defensive 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.

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