JM Smucker (SJM) Stock | Long Term Analysis | Overvalued or Undervalued |

Transcript (auto-generated)

Alright hello and welcome everybody to another stock analysis video where today we’re talking about JM Smucker ticker symbol SJM now this company is traded on the new york stock exchange and this is a company that we’ve been willing to talk about for quite some time in fact there’s a viewer suggested a video that i want to talk about and so here is the video what we’re going to do in this video is talking about whether the company is currently overvalued or undervalued and then we’re going to give you a long-term analysis on this company so you decide for yourself whether you’d be interested investing it or not if you like this video please do like and subscribe because it’s about our channel and let’s get this content out to more people so more people can understand how sjm works and also all the other stocks that we talk about work as well on our channel anyway thank you so much for watching without further ado let’s get started now jm smucker is a company that basically works in the food industry and they compete with numerous other brands for a variety of products but jm smucker is known for three primary things they own a lot of the coffee business in fact they are the licensed dunkin donuts brand for their coffee or duncan as they’re called now so this is definitely a money maker for the company they also work for folgers and also other companies like that so they work a lot in the coffee industry and i think this is very good because a lot of people need coffee these days just with the fact of keeping people awake through a long period of time coffee is very important i think a lot of people have been definitely noticing the need for coffee for just staying up in general so i think coffee is a great market to be in right now and i think that jam smucker is definitely in that market pretty well we also can talk about their consumer food business they own jif which is also just a peanut butter company which i’m not too exactly sure if that’s going to be a great idea for the company just because the thing is is peanut butter and just peanuts in general i think is are going to be a bit of an issue just because we’re right now having an increase in the number of cases for people being allergic to peanuts as generations go along so i think that the peanut industry in general is going to struggle in the long term so this goes for when kraft heinz sold planters i think that was a great idea and so this is kind of the same point i think that they might be able to sell gif and i think that may not be a terrible idea for the company too but i don’t know what they’re going to do that’s just my personal thought they also work in the pet food industry which is where they make milk bone and then they also have nature’s recipe and meow mix and so both of those are all of those are really a essentially good companies that people still need of course when you have a pet and a lot of people like pets so i think for this company in general working in this business is definitely nice and people are going to want to treat their dogs for many many years to come i don’t think that these three businesses are going to be really of any issue but specifically the coffee business i think is going to do very well for jm smucker now let’s talk about the value of this company this is the intrinsic value per share of the company this is the projected free cash flow mall of calculating nutritic value and here we can see the company’s intrinsic value is about 146 a share now that would suggest that the company is currently undervalued based off the current trading value of 133 a share but that is just at the time of recording and i want to show you exactly how this intrinsic value is calculated so that in the future you can understand how to calculate yourself and also you can look this up in general it’s on google if you’re interested in checking it out we can see here that the objective free cash flow model is calculated by taking a growth multiple which is just the projected growth of the earnings each year this is just a percentage growth of the earnings each year you multiply that by the free cash flow which is a six year average of that then we had the total stockholders equity which is simply the assets minus the debt of the company multiply that by 0.8 to offset the growth multiple and then divide that by the shares out saying in the market in order to get the intrinsic value per share of the company now this is just one way of tackling the intrinsic value there’s many ways we like to talk about specifically this one in our videos but do keep in mind that you can make up your own intrinsic value you can look at other ones that are maybe just earnings based but i like this one because it doesn’t take into account just the earnings it takes into account also the assets of the company and also the projected future growth of the company because when you’re buying into a stock there’s kind of expected premium because people are buying the stock as they expect the company to grow in the future and so the point is that in general you’re expected to pay a premium and this cop goes for priced earnings too when we’re talking about a tech company the growth multiple is going to be higher because they likely have a faster growth of earnings every single year so the growth multiple is likely going to be higher and that would also suggest that the company’s very value fair value may be a bit higher compared to maybe a bank or insurance company and so that’s why those companies tend to trade out higher priced earnings because they have faster growth so there’s a little more risk associated with those but you may be able to get a better return so therefore they trade a higher premium and that’s why we like to note that in our videos now here this company has a book value of approximately 75 a share that would suggest that the company currently has plenty of assets to support the current intrinsic value and the intrinsic value is not going to fluctuate very much likely just due the fact that company has a really high asset value supporting it so if the earnings fluctuate even just you know if they decide to fluctuate quite a bit the book value is likely not going to move very much at all and so the point is that the interesting value is going to be supported by the book value alongside the earnings and so if the earnings fluctuate dramatically the intrinsic value is probably not going to move very much so this is very good to see if the company has a very high book value per share because tech companies let’s say tend to have intrinsic values that are primarily based off of the earnings and not really the book value the book value tends to be very low and so as a result the companies that value fluctuates dramatically whereas with this company that is not going to likely be the case of course i can’t say for sure but just based off of tangles and understanding it would not be like that in the future so that is good if you’re looking for a stock that is probably not going to be very volatile and that’s going to hopefully just steadily grow in intrinsic value as time goes on and then that would justify a higher trading value for the stock now we can take a look at the day of the company we consider that they have been paying this down at least a little bit so the company currently has a long-term debt of about three and a half billion dollars and the company originally had about five billion dollars in debt at the beginning of 2020 or really i toward towards the end of 2020 but also at the beginning of 2020. so the company has definitely been doing very well in order to pay this down and i think that the company will be able to consistently pay this down as the earnings increase cut consistently the company has been doing very well with earnings we’ll talk about that in a moment but i i just want to note that this company also has a share of equity that is currently at about eight billion dollars the shared equity like i said is the asset smart the debt of the company so since the company is paying down their debt the assets of or the assets of the company as long as they remain the same the company should be able to increase in shareholder equity and that just buys a higher book value for the company so please do note that this is very good if the company’s shared equity is increasing as long as the outstanding shares aren’t increasing or anything like that then the company should have a higher book value at the end of the day so that’s really good and that’s definitely helped to justify future growth for the company as long as they continue to pay down their debt and also increase in asset value as time goes along now this company currently has a net income of about 150 million dollars a quarter which is pretty good for the company this can allow the company to have a lower price during it’s not super low we’ll talk about that in a moment but this company currently brings in about 800 million dollars over the year so that’s good for the company this is because the earnings have increased year over year and this shows that the company is able to grow in their business and i expect this to consistently increase in the long term due the fact that with inflation the earnings are likely going to increase because they can now charge more so i do think that this is very good and so being in this company it seems to be somewhat inflation protected too due to the fact that it’s able to increase prices and people are still going to buy coffee people are still going to buy pet treats and other things like that so i don’t think that there’s going to be too much of a concern with their business for the long term now let’s take a look at the price earnings currently it’s at about 17 or 17 and a half and this is really a pretty okay number for the company but not that great the company has traded at price earnings of 17 in general in the past or 15 approximately so you’re not getting a great value for this company based off the price earnings but this company still does have a pretty good price turnings compared to other food companies in general so this company is doing is doing pretty okay in the industry now i do think that their price earnings could be even lower if they get to maybe around the price earnings of maybe 10 to 13 that would be suggesting that the company is pretty undervalued based off of just looking at the earnings now according to the intrinsic value the company is still rated to be undervalued at this time but we also understand that the price earnings currently standing to be at about 17 which suggests that the company’s really more fair valued and not really you’re not really getting an amazing value for your money so in general i don’t think this company is necessarily an amazing value stock but it’s a pretty solid growth stock i think and also a pretty sell dividend stock which we’ll talk about in a moment now if we take a look at the shares that are staying in the company we consider that they have been willing to buy back their own stock recently this has allowed the company’s book value to increase and this is a huge plus for shareholders so i think this is going to be very beneficial of course when the company’s buying back their own stock they’re decreasing the outstanding shares of the market this helps to increase the intrinsic value the book value and then the trading value so this is very important and with less outstanding shares in the market there’s less shareholders the assets are distributed across less shares and so therefore each share is worth more money so that’s the whole point of that so also this company does pay out a really good dividend let’s take a look at that here we see the company currently has a dividend yield about three percent and that is suggesting that the company is currently offering a pretty good debate compared to most uh stocks in general this is also better than bank stocks at this point a lot of bank stocks too so this dividends is pretty solid and i do like that this company is in consistently increasing it year over year we do that they’re offering currently 99 cents a share so just that’s per quarter by the way and so the point is that this company is offering a pretty good dividend the company is willing to consistently increase the demand here over a year and this company does have the money to do that so overall i think with this company having a pretty good dividend that should be a pretty solid dividend stock i don’t think that this company is necessarily undervalued and i also don’t necessarily think this company is overvalued i think the company is pretty fair valued and with the three specific industries that it works in with coffee and then of course the food business in general and then also the pet business i think that this company is going to be able to at least consistently grow in earnings as time goes on and also keep up the inflation for the long term so this company does seem to be a pretty okay buy to me of course i’m not a financial advisor or anything like that so please do your own research for investing this is also not financial advice i think that this company is still going to do very well in the long term and that’s just my opinion anyway thank you so much for watching if you like this video please do like and subscribe it is about our channel and please come down below and tell us what you think about this company we’ll try to get back to you anyway thank you again for watching have a good day everybody