Farmer Bros. Company manufactures, wholesales, and distributes coffee, tea, and culinary products in the United States. The company was founded in 1912 and is based in Torrance, California.
FARM Price Forecast Based on DCF Valuation
DCF Fair Value Target:
We started the process of determining a valid price forecast for Farmer Brothers Co with a discounted cash flow analysis -- the results of which can be found in the table below. To summarize, we found that Farmer Brothers Co ranked in the 79th percentile in terms of potential gain offered. More precisely, our analysis suggests the stock is undervalued by approximately 421.5% on a DCF basis. The most interesting components of our discounted cash flow analysis for Farmer Brothers Co ended up being:
The stock's equity weight, or the proportion of capital from equity relative to debt, is 52. Notably, its equity weight is greater than merely 23.73% of US equities in the Consumer Defensive sector yielding a positive free cash flow.
Farmer Brothers Co's weighted average cost of capital (WACC) is 13%; for context, that number is higher than 86.82% of tickers in our DCF set.
Farmer Brothers Co's interest coverage rate -- a measure of gross earnings relative to interest payments -- comes in at -2.39. This coverage rate is greater than that of merely 15.55% of stocks we're observing for the purpose of forecasting via discounted cash flows.
Terminal Growth Rate in Free Cash Flow
Return Relative to Current Share Price
SUMR, BIG, SANW, SPTN, and ALCO can be thought of as valuation peers to FARM, in the sense that they are in the Consumer Defensive sector and have a similar price forecast based on DCF valuation.
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Mr. Moragne brings over thirty years of experience in the consumer goods industry with deep knowledge of the food & beverage category and valuable expertise working in the Direct Store Delivery (DSD), Retail, and Omni Distribution Models. Farmer Brothers believes his knowledge of value added functional beverage ingredients, partnerships within the industry and a proven track record of innovation in the US foods and beverage market will reinforce and position Farmer Brothers as a leader in beverage innovation. Prior to that, Mr. Moragne served as General Manager of the Chiquita Fruit Solutions business division of Chiquita Brands International, Inc., where he oversaw Sales, Marketing and Customer Service among other key operating functions.
Since writing my bearish piece on Farmer Bros. Co. (FarM), the shares are down about 41% against a gain of about 3.25% for the S&P 500. I have a few reasons for revisiting the name. First, the company has obviously published new financial statements, so they deserve comment. Second, a...