In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Free cash flow to the firm (FCFF) is generally described as cash flows after direct costs and before any payments to capital suppliers.

Intrinsic Stock Value (Valuation Summary)
Weighted Average Cost of Capital (WACC)
FCFF Growth Rate (g)

Kellanova, free cash flow to the firm (FCFF) forecast

US$ in millions, except per share data

Year	Value	FCFF_t or Terminal value (TV_t)	Calculation	Present value at 7.02%
0¹	FCFF₀	1,187
1	FCFF₁	1,217	= 1,187 × (1 + 2.54%)	1,137
2	FCFF₂	1,250	= 1,217 × (1 + 2.74%)	1,092
3	FCFF₃	1,287	= 1,250 × (1 + 2.94%)	1,050
4	FCFF₄	1,328	= 1,287 × (1 + 3.15%)	1,012
5	FCFF₅	1,372	= 1,328 × (1 + 3.35%)	977
5	Terminal value (TV₅)	38,597	= 1,372 × (1 + 3.35%) ÷ (7.02% – 3.35%)	27,491
Intrinsic value of Kellanova capital				32,759
Less: Notes payable and long-term debt (fair value)				5,784
Intrinsic value of Kellanova common stock				26,975

Intrinsic value of Kellanova common stock (per share)				$78.81
Current share price				$80.64

Based on: 10-K (reporting date: 2023-12-30).

¹ See details »

Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.

Kellanova, cost of capital

	Value¹	Weight	Required rate of return²	Calculation
Equity (fair value)	27,602	0.83	8.00%
Notes payable and long-term debt (fair value)	5,784	0.17	2.36%	= 3.06% × (1 – 22.82%)

Based on: 10-K (reporting date: 2023-12-30).

¹ US$ in millions

Equity (fair value) = No. shares of common stock outstanding × Current share price
= 342,287,795 × $80.64
= $27,602,087,788.80

Notes payable and long-term debt (fair value). See details »

² Required rate of return on equity is estimated by using CAPM. See details »

Required rate of return on debt. See details »

Required rate of return on debt is after tax.

Estimated (average) effective income tax rate
= (24.80% + 20.40% + 24.10% + 20.20% + 24.60%) ÷ 5
= 22.82%

WACC = 7.02%

FCFF growth rate (g) implied by PRAT model

Kellanova, PRAT model

	Average	Dec 30, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 28, 2019
Selected Financial Data (US$ in millions)
Interest expense		303)	218)	223)	281)	284)
Income from discontinued operations, net of taxes		176)	—)	—)	—)	—)
Net income attributable to Kellanova		951)	960)	1,488)	1,251)	960)

Effective income tax rate (EITR)¹		24.80%	20.40%	24.10%	20.20%	24.60%

Interest expense, after tax²		228)	174)	169)	224)	214)
Add: Dividends declared		800)	797)	788)	782)	769)
Interest expense (after tax) and dividends		1,028)	971)	957)	1,006)	983)

EBIT(1 – EITR)³		1,003)	1,134)	1,657)	1,475)	1,174)

Current maturities of long-term debt		663)	780)	712)	627)	620)
Notes payable		121)	467)	137)	102)	107)
Long-term debt, excluding current maturities		5,089)	5,317)	6,262)	6,746)	7,195)
Total Kellanova equity		3,175)	3,941)	3,720)	3,112)	2,747)
Total capital		9,048)	10,505)	10,831)	10,587)	10,669)
Financial Ratios
Retention rate (RR)⁴		-0.02	0.14	0.42	0.32	0.16
Return on invested capital (ROIC)⁵		11.08%	10.79%	15.30%	13.93%	11.01%
Averages
RR	0.20
ROIC	12.42%

FCFF growth rate (g)⁶	2.54%

Based on: 10-K (reporting date: 2023-12-30), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-28).

¹ See details »

2023 Calculations

² Interest expense, after tax = Interest expense × (1 – EITR)
= 303 × (1 – 24.80%)
= 228

³ EBIT(1 – EITR) = Net income attributable to Kellanova – Income from discontinued operations, net of taxes + Interest expense, after tax
= 951 – 176 + 228
= 1,003

⁴ RR = [EBIT(1 – EITR) – Interest expense (after tax) and dividends] ÷ EBIT(1 – EITR)
= [1,003 – 1,028] ÷ 1,003
= -0.02

⁵ ROIC = 100 × EBIT(1 – EITR) ÷ Total capital
= 100 × 1,003 ÷ 9,048
= 11.08%

⁶ g = RR × ROIC
= 0.20 × 12.42%
= 2.54%

FCFF growth rate (g) implied by single-stage model

g = 100 × (Total capital, fair value₀ × WACC – FCFF₀) ÷ (Total capital, fair value₀ + FCFF₀)
= 100 × (33,386 × 7.02% – 1,187) ÷ (33,386 + 1,187)
= 3.35%

where:

Total capital, fair value₀ = current fair value of Kellanova debt and equity (US$ in millions)
FCFF₀ = the last year Kellanova free cash flow to the firm (US$ in millions)
WACC = weighted average cost of Kellanova capital

FCFF growth rate (g) forecast

Kellanova, H-model

Year	Value	g_t
1	g₁	2.54%
2	g₂	2.74%
3	g₃	2.94%
4	g₄	3.15%
5 and thereafter	g₅	3.35%

where:
g₁ is implied by PRAT model
g₅ is implied by single-stage model
g₂, g₃ and g₄ are calculated using linear interpoltion between g₁ and g₅

Calculations

g₂ = g₁ + (g₅ – g₁) × (2 – 1) ÷ (5 – 1)
= 2.54% + (3.35% – 2.54%) × (2 – 1) ÷ (5 – 1)
= 2.74%

g₃ = g₁ + (g₅ – g₁) × (3 – 1) ÷ (5 – 1)
= 2.54% + (3.35% – 2.54%) × (3 – 1) ÷ (5 – 1)
= 2.94%

g₄ = g₁ + (g₅ – g₁) × (4 – 1) ÷ (5 – 1)
= 2.54% + (3.35% – 2.54%) × (4 – 1) ÷ (5 – 1)
= 3.15%

Kellanova (NYSE:K)

Present Value of Free Cash Flow to the Firm (FCFF)

Intrinsic Stock Value (Valuation Summary)

Weighted Average Cost of Capital (WACC)

FCFF Growth Rate (g)

FCFF growth rate (g) implied by PRAT model

FCFF growth rate (g) implied by single-stage model

FCFF growth rate (g) forecast