McCormick & Company Incorporated (MKC)

Conclusion

McCormick & Company makes and sells spices, herbs, seasoning mixes and condiments to grocery and mass retailers, and to food manufacturers and foodservice customers. At 47.88 USD on 2026-11-09, the market capitalisation is 12.2 billion USD and the enterprise value is 16.1 billion USD.

The verdict is undervalued. Today's multiples sit well below the company's own ten-year medians: P/E is 8.2x against a median of 28.5x, a premium of -71.3%, and EV/EBITDA is 12.1x against 21.6x, a premium of -44.0%. The discounted cash flow gives 61.4 USD per share at a discount rate of 8.9%, and the fair value from historical multiples is 97.5 USD. The fair value band runs from 63.58 to 95.37 USD with a midpoint of 79.48 USD, a margin of safety of 66.0%. The reverse DCF implies growth of 0.5% a year, while revenue grew at 4.1% a year over five years, so the price assumes a weaker future than the past.

What holds the case up is cash conversion: free cash flow was 90.7% of earnings over five years, and revenue grew in each of the last ten years. What could break it is the balance sheet and returns. The current ratio is 0.66, and the Altman Z-score of 1.77 falls in the distress zone. ROIC of 7.6% sits just below the WACC of 7.7%, and analysts have cut next-year estimates by 2.35% over the last 90 days, with nine downward revisions against one upward in the last 30 days.

Financial health

The colour for financial strength is red, held back by a current ratio of 0.66 and an Altman Z-score of 1.77, while interest coverage of 4.7x and net debt to EBITDA of 2.9x are neutral. The quick ratio is 0.26 and debt to equity is 0.61. The Altman model was designed for manufacturers, and the company is one, but its zone is distress. Insolvency risk: low, about 0.8% by the estimate of the Ohlson model over one to two years. The current ratio and the Altman zone are the weakest points, so short-term liquidity relies on ongoing cash generation and access to credit.

Earnings quality

The colour for earnings quality is green, supported by free cash flow conversion of 90.7% over five years and by the Beneish M-score of -2.469, which is unlikely to signal manipulation. The TTM conversion is lower at 62.1%. The accrual ratio is -1.3%, and stock-based compensation is 0.6% of revenue, leaving free cash flow after stock compensation at 882.5 million USD. The share count has grown by only 0.02% a year over five years. The Piotroski score is 6 out of 9. The company beat earnings estimates in six of the last eight quarters, with an average surprise of 5.9%. However, next-year estimates have been revised down by 2.35% over 90 days.

Profitability

The colour for profitability is yellow. The gross margin of 39.1% is in line with its ten-year median of 39.0%, while the operating margin of 13.8% is below its median of 15.7%. The net margin of 19.4% is well above its median of 11.6%, but this reflects a one-off or non-operating effect, not a stronger core business. ROIC is 7.6% against a WACC of 7.7%, and the given ROIC minus WACC value is -0.06%, which is neutral. The five-year median ROIC is 8.6%. The DuPont split shows a net margin of 11.5%, asset turnover of 0.52 and an equity multiplier of 2.30, so the 21.3% return on equity relies heavily on leverage.

Growth

The colour for growth is yellow. Revenue has compounded at 2.5% over three years, 4.1% over five years and 4.8% over ten years. EPS compound growth is 5.1% over three years but only 1.1% over five years, and 6.6% over ten years. Free cash flow per share grew 24.0% over three years but fell 2.0% a year over five years. Revenue grew in all ten of the last ten comparable years, which is a steady record. The gap between the five-year EPS growth and the three-year figure shows that earnings growth has been uneven.

Valuation

The colour for valuation is green. The verdict is undervalued, with a margin of safety of 66.0%. Current multiples are well below their ten-year medians: P/E 8.2x against 28.5x, EV/EBITDA 12.1x against 21.6x, P/FCF 13.2x against 26.8x, P/S 1.6x against 3.0x and P/B 1.7x against 5.1x. The DCF gives 61.4 USD per share at a discount rate of 8.9% and a long-term growth rate of 2.5%. The terminal value makes up 55.7% of the DCF, so the result depends heavily on long-run assumptions. The reverse DCF implies 0.5% growth. The fair value band is an order of magnitude built on fixed assumptions, including a 5% equity risk premium and capped growth, and is not a price target. The dividend yield is 4.2%, the forward yield is 3.8%, and the payout on free cash flow is 54.8%.

Risks

The weakest numbers would hurt the company in different ways. A current ratio of 0.66 leaves little cushion against short-term obligations, and an Altman Z-score of 1.77 signals financial stress if the company's earnings weaken. ROIC of 7.6% close to a WACC of 7.7% means new investment earns only about its cost of capital, so growth adds little value. Downward estimate revisions could signal weaker earnings ahead, and the reverse DCF shows the price already assumes very low growth. The DCF depends on the terminal value for 55.7% of its result. This analysis has no debt maturity schedule and no revenue by segment, so refinancing risk and the mix between the Consumer and Flavor Solutions segments cannot be assessed.