Campbell Soup (CPB): Evaluating the Stock’s Valuation Following a Strong Earnings Turnaround

If you have been watching Campbell's (CPB) lately, the company’s latest earnings might have made you pause and reconsider your next steps. The food giant just posted stronger financial results, reversing last year’s losses and reporting year-over-year sales growth in both the fourth quarter and across the full year. For investors wondering whether this is a blip or a genuine turnaround, it is a development you cannot ignore.

These numbers cap off a complicated year. While Campbell's enjoyed improved net income, the stock has slipped around 32% over the past year, even as earnings outpaced expectations and revenue ticked higher. The company has completed two buyback plans since last fall and shifted some leadership roles, but share price momentum has not increased following these efforts.

With improving fundamentals but little change in how the stock is being valued, it is worth asking whether Campbell's is presenting a bargain right now or if the market has already caught up to the company's growth story.

Most Popular Narrative: 2.9% Undervalued

The most widely followed narrative holds that Campbell's shares are currently trading just below their fair value, with a discount to fair value of 2.9% using a discount rate of 6.78%. Analysts consider the stock undervalued by a narrow margin, but not dramatically so.

Ongoing execution of expanded cost savings initiatives and supply chain optimization, including the newly raised $375 million target, should progressively improve operational efficiency, bolster net margins, and generate incremental earnings growth over the next several years.

Curious what pushes Campbell's fair value higher despite lackluster stock performance and sector headwinds? This narrative leans on a select combination of future profit margins, robust cost controls, and earnings growth, all fueled by ambitious operational changes. Wondering just how much upside these internal moves could unlock, and which figures might move the needle? There is more to this story. Stay tuned for the catalysts and uncertainties that underpin this fair value claim.

Result: Fair Value of $34.58 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, persistent volume declines in key categories and rising input costs could create challenges for Campbell's ability to sustain its expected margin and earnings growth.

Find out about the key risks to this Campbell's narrative.

Another View: Discounted Cash Flow Puts Price Into Perspective

While analysts see Campbell's as close to fair value based on future earnings, our DCF model shows a different story. By estimating all future cash flows, it signals the stock may actually be undervalued. Could this approach reveal overlooked potential?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Campbell's for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Campbell's Narrative

If you see things differently or want to dig into the details yourself, you can build your own Campbell’s story in just a few minutes. Do it your way

A great starting point for your Campbell's research is our analysis highlighting 4 key rewards and 2 important warning signs that could impact your investment decision.

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This 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.

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