The Kraft Heinz Company (KHC)

Conclusion

The Kraft Heinz Company manufactures and markets food and beverage products, including condiments, cheese, frozen meals, coffee and cold cuts, under brands such as Kraft, Heinz, Oscar Mayer and Philadelphia. At 24.42 USD on 2026-11-09, the shares carry a market capitalisation of 28.9 billion USD and an enterprise value of 45.0 billion USD.

The verdict is undervalued. The fair value band runs from 30.16 to 45.24 USD, with a midpoint of 37.70 USD and a margin of safety of 54.4% at the current price. Price-to-free-cash-flow of 8.2 sits against a ten-year median of 11.8, and price-to-sales of 1.2 against 1.7. The DCF gives 40.27 USD per share at a discount rate of 8.9%. The reverse DCF implies annual growth of -6.2%, while revenue has shrunk by 1.0% a year over five years, so the price assumes that decline continues.

The strongest supports are five-year free cash flow conversion of 5.05, a free cash flow yield of 12.2%, and eight straight earnings beats averaging a surprise of 9.9%. The weakest numbers are an Altman Z-score of 0.52, interest coverage of -4.43, and an operating margin of -13.4% against a ten-year median of 12.8%. Return on invested capital of -4.7% against a WACC of 7.0% is the clearest sign that the business currently earns less than its cost of capital.

Financial health

Financial strength is red, because the Altman Z-score, net debt to EBITDA and interest coverage are assessed bad, while the current ratio is neutral. The current ratio is 1.02 and the quick ratio 0.48 at 2026-09-30, and debt to equity is 0.50. The net debt to EBITDA value is not available. Interest coverage is -4.43 on a trailing twelve-month basis, because the company reports negative EBITDA and operating earnings do not cover interest. The Altman Z-score is 0.52, in the distress zone; the model was designed for manufacturers, and the company is a manufacturer, so the reading applies. Insolvency risk: low, about 0.5% by the estimate of the Ohlson model over one to two years.

Earnings quality

Earnings quality is green, supported by five-year free cash flow conversion of 5.05 and an accrual ratio of -12.1%, which means cash generation exceeds reported earnings. Free cash flow after stock-based compensation is 3.43 billion USD on a trailing twelve-month basis, and stock-based compensation equals 0.4% of revenue. The share count fell at a compound rate of 0.7% over five years, consistent with buybacks. The Piotroski score is 5 of 9. The trailing twelve-month free cash flow conversion value and the Beneish M-score are not available. The company beat earnings estimates in all eight of the last quarters, by 9.9% on average. Estimate revisions are weak: the next year's estimate fell 1.5% over 90 days, with seven downward revisions and no upward revisions in the last 30 days.

Profitability

Profitability is red. Operating margin is -13.4% against a ten-year median of 12.8%, and net margin is -14.0% against a median of 8.3%. Gross margin of 33.5% is close to its median of 33.7%, so the pressure sits below the gross profit line. Operating margin stability is 3.10 on annual data. Return on invested capital is -4.7% against a WACC of 7.0%, a ROIC minus WACC of -11.6%, and its five-year median is 4.4%. The 2025 DuPont split shows a net margin of -23.4%, asset turnover of 0.31 and an equity multiplier of 1.96. Return on equity is -9.6%, so leverage is not flattering the result.

Growth

Growth is red. Revenue has compounded at -2.0% over three years and -1.0% over five years, while the ten-year rate is 3.1%. Revenue grew in 5 of the 10 comparable years. Free cash flow per share rose at 34.9% a year over three years, but fell at 2.7% over five years and rose at 2.9% over ten. The estimated growth for next year is -1.7%. The five-year decline in revenue is the more reliable trend, and the three-year free cash flow rebound does not offset it on the company's own numbers.

Valuation

Valuation is green. Against their own ten-year medians, price-to-free-cash-flow is 8.2 against 11.8 (a premium of -30.7%), price-to-sales is 1.2 against 1.7 (a premium of -30.5%), and price-to-book is 0.80 against 0.89 (a premium of -9.7%). Price-to-earnings and EV/EBITDA cannot be read at current levels because earnings and EBITDA are negative; their medians are 18.9 and 14.6. The free cash flow yield is 12.2%. The DCF gives 40.27 USD per share, using a discount rate of 8.9%, no growth in the first stage and 2.5% terminal growth. The terminal value accounts for 53% of that figure. The fair value from historical multiples is 35.13 USD. The reverse DCF implies -6.2% growth against -1.0% five-year revenue growth. The tax rate of 21% is assumed. The dividend yield is 6.6%, and the payout on free cash flow is 53.7%. The fair value is an order of magnitude built on fixed assumptions, not a price target.

Risks

Each weak number has a concrete consequence. Interest coverage of -4.43 means operating earnings do not cover interest, so the balance sheet depends on cash flow and refinancing. The Altman Z-score of 0.52 points to distress, while the Ohlson estimate of low insolvency risk points the other way, and the two should be weighed together. A return on invested capital of -4.7% below a WACC of 7.0% means the business is currently destroying value. Falling next-year estimates could reduce the cash flow on which the valuation rests. Not available: the trailing twelve-month free cash flow conversion, the net debt to EBITDA value, the Beneish M-score, and the current price-to-earnings and EV/EBITDA. This analysis has no debt maturity schedule and no revenue by segment, so it cannot show when debt falls due or which product lines drive the decline.