Does Hormel’s Recent Share Rebound Signal a Turning Point for Its Valuation?

• If you are wondering whether Hormel Foods at around $24 a share is a bargain hiding in plain sight or a value trap in the making, you are not alone.
• The stock has bounced about 4.9% over the last week and 12.9% over the past month, but it is still down sharply at -22.8% year to date and -21.9% over the last year. This mix of recent gains and longer-term weakness hints at both recovery potential and lingering market skepticism.
• Recent headlines have focused on Hormel's ongoing portfolio reshaping and brand investment, including pushing deeper into higher margin branded foods and streamlining parts of its legacy commodity business. At the same time, analysts and industry watchers have been debating how these strategic moves position Hormel against changing consumer tastes and intensifying competition in packaged foods.
• Right now, Hormel scores just 2/6 on our valuation checks. This suggests that while some metrics flag the shares as undervalued, others argue the price is only fair. We will walk through the main valuation methods next and then finish with a more holistic way to judge what Hormel might really be worth.

Hormel Foods scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Hormel Foods Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model estimates what a company is worth by projecting future cash flows and then discounting them back to today, to reflect the time value of money and risk.

For Hormel Foods, the latest twelve month free cash flow is about $564.8 Million. Analysts expect this to rise to around $982.5 Million by 2028, and Simply Wall St then extrapolates further modest growth, with projected free cash flow reaching roughly $1.3 Billion by 2035 under a two stage Free Cash Flow to Equity model.

When all those future cash flows are discounted back, the model arrives at an estimated intrinsic value of about $47.21 per share. Compared with the current share price near $24, the DCF suggests the stock is trading at a roughly 48.4% discount.

On this cash flow view alone, Hormel appears meaningfully undervalued, provided the projected growth in free cash flow occurs as expected.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Hormel Foods is undervalued by 48.4%. Track this in your watchlist or portfolio, or discover 906 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Hormel Foods.

Approach 2: Hormel Foods Price vs Earnings

For profitable companies like Hormel Foods, the price to earnings, or PE, ratio is a straightforward way to judge whether investors are paying a sensible price for each dollar of current earnings. A higher PE can be justified when a business is expected to grow faster or is seen as lower risk. Slower growth or higher uncertainty usually calls for a lower, more conservative multiple.

Hormel currently trades on about 28.0x earnings, which is above both the Food industry average of roughly 20.4x and the broader peer group average of about 8.7x. To go a step further, Simply Wall St calculates a proprietary Fair Ratio for Hormel of around 21.4x. This Fair Ratio reflects what investors might reasonably pay given Hormel’s specific mix of growth prospects, profitability, industry, market cap and risk profile. It is therefore more tailored than simple industry or peer comparisons.

Because Hormel’s actual PE of 28.0x sits meaningfully above this 21.4x Fair Ratio, the stock appears somewhat expensive on an earnings basis.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1442 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Hormel Foods Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple way to attach your own story about a company to the numbers, by connecting what you believe about its future revenue, earnings and margins to a financial forecast and then to a fair value estimate.

On Simply Wall St’s Community page, Narratives are an easy, accessible tool used by millions of investors to spell out why they think a stock is attractive or risky and to translate that view directly into a fair value that can be compared with today’s price. This can help them decide when a stock looks buyable or when it may be time to sell.

Narratives update dynamically as new information arrives, such as earnings results, tariff changes or dividend announcements. This is especially helpful for a stock like Hormel Foods, where one investor might build a bullish Narrative around margin recovery, healthier product innovation and an upside fair value closer to the most optimistic analyst target of about $34 per share, while another focuses on weak demand, input cost risks and slow execution to justify a more cautious fair value near the low end of analyst expectations, around $25 per share.

Do you think there's more to the story for Hormel Foods? Head over to our Community to see what others are saying!

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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