Latest news with #AssociatedBritishFoods'
Business of Fashion
29-04-2025
- Business
- Business of Fashion
Primark Committed to US Expansion Despite Tariff Uncertainty, Says Boss
Associated British Foods' Primark clothing retail business is committed to expanding in the United States despite President Donald Trump's erratic approach to tariffs, its boss said on Tuesday. Primark's US business accounts for about 5 percent of the unit's total sales. It currently trades from 29 stores in the US and has signed an additional 18 leases. Trump's stream of tariff announcements, roll-backs and exemptions has left some firms wary of committing to expansion. However, AB Foods chief executive George Weston said Primark was 'absolutely' committed to a plan to have 60 US stores by 2026 and remains confident it can succeed in a market that has been a graveyard for some of Britain's biggest retailers, including Marks & Spencer and Tesco. Weston told Reuters in an interview that Primark would take the '[tariff] hits where we have to take them and before we take more substantive actions wait to see where we really are.' But he said Primark could benefit from Trump's move to end the 'de minimis' duty exemption, which allows shipments worth less than $800 duty-free entry to the US and has helped companies like Shein keep prices low. 'De minimis imports in the US are very, very large, they supply a lot of Americans who don't know about Primark yet but are looking for value,' he said. 'With prices going up from this part of the trade, I wonder if some Americans might start going back to shopping centres to find value there.' Weston was speaking after AB Foods reported first half results. By James Davey; Edited by Paul Sandle Learn more: Primark Says CEO Marchant Resigned Over Inappropriate Behaviour The executive stepped down following an investigation into his behaviour toward a female employee, according to the fashion chain's owner AB Foods.
Yahoo
09-03-2025
- Business
- Yahoo
Is Associated British Foods plc (LON:ABF) Trading At A 20% Discount?
The projected fair value for Associated British Foods is UK£24.03 based on 2 Stage Free Cash Flow to Equity Associated British Foods' UK£19.17 share price signals that it might be 20% undervalued Our fair value estimate is 6.8% higher than Associated British Foods' analyst price target of UK£22.49 How far off is Associated British Foods plc (LON:ABF) from its intrinsic value? Using the most recent financial data, we'll take a look at whether the stock is fairly priced by taking the expected future cash flows and discounting them to today's value. We will use the Discounted Cash Flow (DCF) model on this occasion. It may sound complicated, but actually it is quite simple! Companies can be valued in a lot of ways, so we would point out that a DCF is not perfect for every situation. If you want to learn more about discounted cash flow, the rationale behind this calculation can be read in detail in the Simply Wall St analysis model. Check out our latest analysis for Associated British Foods We are going to use a two-stage DCF model, which, as the name states, takes into account two stages of growth. The first stage is generally a higher growth period which levels off heading towards the terminal value, captured in the second 'steady growth' period. In the first stage we need to estimate the cash flows to the business over the next ten years. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years. A DCF is all about the idea that a dollar in the future is less valuable than a dollar today, so we need to discount the sum of these future cash flows to arrive at a present value estimate: 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 Levered FCF (£, Millions) UK£817.6m UK£838.2m UK£920.1m UK£1.08b UK£954.0m UK£886.1m UK£848.1m UK£828.5m UK£820.8m UK£821.1m Growth Rate Estimate Source Analyst x5 Analyst x5 Analyst x5 Analyst x3 Analyst x2 Est @ -7.12% Est @ -4.29% Est @ -2.31% Est @ -0.93% Est @ 0.04% Present Value (£, Millions) Discounted @ 6.4% UK£768 UK£740 UK£764 UK£840 UK£699 UK£611 UK£549 UK£504 UK£469 UK£441 ("Est" = FCF growth rate estimated by Simply Wall St)Present Value of 10-year Cash Flow (PVCF) = UK£6.4b The second stage is also known as Terminal Value, this is the business's cash flow after the first stage. For a number of reasons a very conservative growth rate is used that cannot exceed that of a country's GDP growth. In this case we have used the 5-year average of the 10-year government bond yield (2.3%) to estimate future growth. In the same way as with the 10-year 'growth' period, we discount future cash flows to today's value, using a cost of equity of 6.4%. Terminal Value (TV)= FCF2034 × (1 + g) ÷ (r – g) = UK£821m× (1 + 2.3%) ÷ (6.4%– 2.3%) = UK£20b Present Value of Terminal Value (PVTV)= TV / (1 + r)10= UK£20b÷ ( 1 + 6.4%)10= UK£11b The total value is the sum of cash flows for the next ten years plus the discounted terminal value, which results in the Total Equity Value, which in this case is UK£17b. In the final step we divide the equity value by the number of shares outstanding. Compared to the current share price of UK£19.2, the company appears a touch undervalued at a 20% discount to where the stock price trades currently. Valuations are imprecise instruments though, rather like a telescope - move a few degrees and end up in a different galaxy. Do keep this in mind. We would point out that the most important inputs to a discounted cash flow are the discount rate and of course the actual cash flows. You don't have to agree with these inputs, I recommend redoing the calculations yourself and playing with them. The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance. Given that we are looking at Associated British Foods as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. In this calculation we've used 6.4%, which is based on a levered beta of 0.800. Beta is a measure of a stock's volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business. Strength Earnings growth over the past year exceeded the industry. Debt is not viewed as a risk. Dividends are covered by earnings and cash flows. Weakness Dividend is low compared to the top 25% of dividend payers in the Food market. Opportunity Annual earnings are forecast to grow for the next 3 years. Good value based on P/E ratio and estimated fair value. Threat Annual earnings are forecast to grow slower than the British market. Valuation is only one side of the coin in terms of building your investment thesis, and it is only one of many factors that you need to assess for a company. The DCF model is not a perfect stock valuation tool. Preferably you'd apply different cases and assumptions and see how they would impact the company's valuation. For example, changes in the company's cost of equity or the risk free rate can significantly impact the valuation. Can we work out why the company is trading at a discount to intrinsic value? For Associated British Foods, there are three further items you should assess: Risks: Every company has them, and we've spotted 1 warning sign for Associated British Foods you should know about. Future Earnings: How does ABF's growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart. Other High Quality Alternatives: Do you like a good all-rounder? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing! PS. Simply Wall St updates its DCF calculation for every British stock every day, so if you want to find the intrinsic value of any other stock just search here. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Sign in to access your portfolio
Yahoo
23-02-2025
- Business
- Yahoo
The past year for Associated British Foods (LON:ABF) investors has not been profitable
Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. Unfortunately the Associated British Foods plc (LON:ABF) share price slid 17% over twelve months. That falls noticeably short of the market return of around 14%. Longer term shareholders haven't suffered as badly, since the stock is down a comparatively less painful 2.5% in three years. Shareholders have had an even rougher run lately, with the share price down 13% in the last 90 days. It's worthwhile assessing if the company's economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let's do just that. See our latest analysis for Associated British Foods In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS). Even though the Associated British Foods share price is down over the year, its EPS actually improved. It could be that the share price was previously over-hyped. It's surprising to see the share price fall so much, despite the improved EPS. So it's well worth checking out some other metrics, too. We don't see any weakness in the Associated British Foods' dividend so the steady payout can't really explain the share price drop. The revenue trend doesn't seem to explain why the share price is down. Unless, of course, the market was expecting a revenue uptick. You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values). Associated British Foods is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. Given we have quite a good number of analyst forecasts, it might be well worth checking out this free chart depicting consensus estimates. As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Associated British Foods the TSR over the last 1 year was -13%, which is better than the share price return mentioned above. This is largely a result of its dividend payments! Investors in Associated British Foods had a tough year, with a total loss of 13% (including dividends), against a market gain of about 14%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 1.0% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. It's always interesting to track share price performance over the longer term. But to understand Associated British Foods better, we need to consider many other factors. For example, we've discovered 1 warning sign for Associated British Foods that you should be aware of before investing here. We will like Associated British Foods better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying. Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on British exchanges. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Sign in to access your portfolio
