CAG
CAG
REDUCE 2026-03-18
Model
DDM
Price at Report
$15.56
Base IV
$17.56
Bear IV
$11.51
Bull IV
$21.24
Entry Zone: 12-16 · Sell Above: 18
Bore Family Office
Valuation Report — Conagra Brands (CAG) • March 18, 2026
3-Stage DDM (Ke) • Discount Rate: 10.50% • Current Price: $15.56
Prepared by Lurch • Bore Family Office • Data: Finnhub, StockAnalysis.com, S&P Global Market Intelligence
🏢 Business Overview
Conagra Brands is one of North America's largest packaged food companies, with a portfolio spanning frozen meals (Birds Eye, Marie Callender's, Healthy Choice), shelf-stable grocery (Hunt's, Slim Jim, PAM, Snack Pack), and foodservice. The company's $10.9B acquisition of Pinnacle Foods in 2018 left it with ~$8B in net debt that has proven stubbornly difficult to reduce. Revenue has declined three consecutive fiscal years as volumes erode from elevated post-COVID pricing, while gross margin has compressed from 28.4% (FY2021) to 24.6% TTM — a 380bp deterioration over four years. TTM EBITDA of -$14M reflects heavy impairment charges; normalized EBITDA is estimated at ~$1.5B.| Business Segment | Revenue | % of Total | YoY Growth | Margin | Notes |
|---|---|---|---|---|---|
| Grocery & Snacks | $4,270M | 38% | -3.5% | — | Hunt's, Slim Jim, Snack Pack, PAM — volume pressure continuing |
| Refrigerated & Frozen | $3,930M | 35% | -3.0% | — | Birds Eye, Marie Callender's, Healthy Choice — structural shift away from frozen |
| Foodservice | $1,910M | 17% | +1.0% | — | Most stable segment |
| International | $1,125M | 10% | -2.0% | — | Canada, Mexico, exports |
🔍 Quality Scorecard
| Metric | Value | Assessment |
|---|---|---|
| FCF Margin | 7.8% | 5–10% adequate |
| Debt / EBITDA | 8.4x | >4x elevated |
| Revenue Trend | Declining 3yr | 3-year directional trend |
| FCF Margin Trend | Contracting | Directional margin trajectory |
| Analyst Revisions | Downward revisions | Last 90 days consensus direction |
⚠️ Elevated value trap risk — verify thesis before acting
📊 Financial Snapshot
| Metric | FY2021 | FY2022 | FY2023 | FY2024 | FY2025 | TTM |
|---|---|---|---|---|---|---|
| Revenue ($M) | $11,185 | $11,536 | $12,277 | $12,051 | $11,613 | $11,235 |
| EBITDA ($M) | $2,164 | $1,721 | $1,445 | $1,254 | $1,755 | $-14 |
| Operating Income ($M) | $1,776 | $1,346 | $1,075 | $853 | $1,365 | $310 |
| Net Income ($M) | $1,299 | $888 | $684 | $347 | $1,152 | $158 |
| EPS (diluted) | $2.66 | $1.84 | $1.42 | $0.72 | $2.40 | $-0.21 |
| Free Cash Flow ($M) | $962 | $713 | $633 | $1,628 | $1,303 | $876 |
| Annual DPS | $1.038 | $1.250 | $1.320 | $1.400 | $1.400 | $1.400 |
| Total Debt ($M) | $9,006 | $8,980 | $9,234 | $8,441 | $8,068 | $8,068 |
| Rev YoY Growth | — | +3.1% | +6.4% | -1.8% | -3.6% | -3.3% |
| Gross Margin | 28.4% | 24.6% | 26.6% | 27.7% | 25.9% | 24.5% |
| EBITDA Margin | 19.3% | 14.9% | 11.8% | 10.4% | 15.1% | -0.1% |
| Operating Margin | 15.9% | 11.7% | 8.8% | 7.1% | 11.8% | 2.8% |
| Net Margin | 11.6% | 7.7% | 5.6% | 2.9% | 9.9% | 1.4% |
📈 DDM Scenarios
$12
🔴 Bear
$18
📊 Base
$21
🚀 Bull
$15.56
Current Price
$19
Analyst Avg PT
| Scenario | Stage 1 (Yrs 1–5) | Stage 2 (Yrs 6–10) | Terminal g | Ke | Intrinsic Value | vs Price |
|---|---|---|---|---|---|---|
| 🔴 Bear | -5.0% | 0.0% | 1.5% | 10.50% | $12 | ▼26.0% |
| 📊 Base | 2.0% | 2.5% | 2.5% | 10.50% | $18 | ▲12.9% |
| 🚀 Bull | 5.0% | 3.5% | 3.0% | 10.50% | $21 | ▲36.5% |
📋 Full 10-Year Projection Tables
Bear Scenario
Stage 1: -5.0% | Stage 2: 0.0% | Terminal: 1.5%
| Period | Stage | DPS / Dist. | PV of DPS | Cumulative IV |
|---|---|---|---|---|
| Year 1 | Stage 1 | $1.330 | $1.204 | $1.20 |
| Year 2 | Stage 1 | $1.263 | $1.035 | $2.24 |
| Year 3 | Stage 1 | $1.200 | $0.890 | $3.13 |
| Year 4 | Stage 1 | $1.140 | $0.765 | $3.89 |
| Year 5 | Stage 1 | $1.083 | $0.658 | $4.55 |
| Year 6 | Stage 2 | $1.083 | $0.595 | $5.15 |
| Year 7 | Stage 2 | $1.083 | $0.539 | $5.68 |
| Year 8 | Stage 2 | $1.083 | $0.487 | $6.17 |
| Year 9 | Stage 2 | $1.083 | $0.441 | $6.61 |
| Year 10 | Stage 2 | $1.083 | $0.399 | $7.01 |
| Terminal | — | TV=$12.22 | PV(TV)=$4.50 (39% of IV) | $11.51 |
| Intrinsic Value | — | — | PV(Divs) $7.01 + PV(TV) $4.50 | $11.51 |
How the price per share is derived: Each year's projected dividend is discounted back at Ke (10.50%) to get its present value. After Year 10, dividends are assumed to grow at the terminal rate (1.5%) in perpetuity — the Gordon Growth formula gives a terminal value of DPS11 / (Ke − gT) = $12.22. That terminal value is then discounted back 10 years to today's dollars (PV of TV = $4.50). Intrinsic value = PV of all dividends ($7.01) + PV of terminal value ($4.50) = $11.51 per share.
Base Scenario
Stage 1: 2.0% | Stage 2: 2.5% | Terminal: 2.5%
| Period | Stage | DPS / Dist. | PV of DPS | Cumulative IV |
|---|---|---|---|---|
| Year 1 | Stage 1 | $1.428 | $1.292 | $1.29 |
| Year 2 | Stage 1 | $1.457 | $1.193 | $2.49 |
| Year 3 | Stage 1 | $1.486 | $1.101 | $3.59 |
| Year 4 | Stage 1 | $1.515 | $1.016 | $4.60 |
| Year 5 | Stage 1 | $1.546 | $0.938 | $5.54 |
| Year 6 | Stage 2 | $1.584 | $0.870 | $6.41 |
| Year 7 | Stage 2 | $1.624 | $0.807 | $7.22 |
| Year 8 | Stage 2 | $1.665 | $0.749 | $7.97 |
| Year 9 | Stage 2 | $1.706 | $0.695 | $8.66 |
| Year 10 | Stage 2 | $1.749 | $0.644 | $9.31 |
| Terminal | — | TV=$22.41 | PV(TV)=$8.26 (47% of IV) | $17.56 |
| Intrinsic Value | — | — | PV(Divs) $9.31 + PV(TV) $8.26 | $17.56 |
How the price per share is derived: Each year's projected dividend is discounted back at Ke (10.50%) to get its present value. After Year 10, dividends are assumed to grow at the terminal rate (2.5%) in perpetuity — the Gordon Growth formula gives a terminal value of DPS11 / (Ke − gT) = $22.41. That terminal value is then discounted back 10 years to today's dollars (PV of TV = $8.26). Intrinsic value = PV of all dividends ($9.31) + PV of terminal value ($8.26) = $17.56 per share.
Bull Scenario
Stage 1: 5.0% | Stage 2: 3.5% | Terminal: 3.0%
| Period | Stage | DPS / Dist. | PV of DPS | Cumulative IV |
|---|---|---|---|---|
| Year 1 | Stage 1 | $1.470 | $1.330 | $1.33 |
| Year 2 | Stage 1 | $1.544 | $1.264 | $2.59 |
| Year 3 | Stage 1 | $1.621 | $1.201 | $3.80 |
| Year 4 | Stage 1 | $1.702 | $1.141 | $4.94 |
| Year 5 | Stage 1 | $1.787 | $1.085 | $6.02 |
| Year 6 | Stage 2 | $1.849 | $1.016 | $7.04 |
| Year 7 | Stage 2 | $1.914 | $0.952 | $7.99 |
| Year 8 | Stage 2 | $1.981 | $0.891 | $8.88 |
| Year 9 | Stage 2 | $2.050 | $0.835 | $9.72 |
| Year 10 | Stage 2 | $2.122 | $0.782 | $10.50 |
| Terminal | — | TV=$29.14 | PV(TV)=$10.74 (51% of IV) | $21.24 |
| Intrinsic Value | — | — | PV(Divs) $10.50 + PV(TV) $10.74 | $21.24 |
How the price per share is derived: Each year's projected dividend is discounted back at Ke (10.50%) to get its present value. After Year 10, dividends are assumed to grow at the terminal rate (3.0%) in perpetuity — the Gordon Growth formula gives a terminal value of DPS11 / (Ke − gT) = $29.14. That terminal value is then discounted back 10 years to today's dollars (PV of TV = $10.74). Intrinsic value = PV of all dividends ($10.50) + PV of terminal value ($10.74) = $21.24 per share.
🔲 Sensitivity Table
| Ke \ gT | 1.5% | 2.0% | 2.5% | 3.0% | 3.5% |
|---|---|---|---|---|---|
| 8.5% | $21 | $22 | $23 | $25 | $26 |
| 9.0% | $20 | $21 | $22 | $23 | $24 |
| 9.5% | $19 | $19 | $20 | $21 | $22 |
| 10.0% | $18 | $18 | $19 | $19 | $20 |
| 10.5% | $17 | $17 | $18 | $18 | $19 |
| 11.0% | $16 | $16 | $17 | $17 | $18 |
| 11.5% | $15 | $15 | $16 | $16 | $17 |
| 12.0% | $14 | $14 | $15 | $15 | $16 |
| 12.5% | $14 | $14 | $14 | $14 | $15 |
Green = >10% above current price. Red = >10% below. Gold = within ±10%.
📉 Long-Term Price Trend Channel
Log-linear trend fitted to full price history. ±1.5σ bands. Green shaded zone = bottom 25% of historical range — historically attractive entry.
🏦 Comparable Valuation
| Ticker | Company | Fwd P/E | EV/EBITDA | Div Yield | Gross Margin |
|---|---|---|---|---|---|
| CAG | Conagra Brands (current) | 8.9x | ~8x* | 9.0% | 24.6% |
| GIS | General Mills | 10.9x | 9.2x | 9.1% | 34.1% |
| CPB | Campbell Soup | 13.2x | 11.8x | 3.9% | 30.2% |
| HRL | Hormel Foods | 17.4x | 10.5x | 3.8% | 17.8% |
| SJM | J.M. Smucker | 10.5x | 8.9x | 4.1% | 37.5% |
| CAG | 5-yr avg (own history) | 14.0x | 11.0x | 3.5% | 27.1% |
💰 Dividend / Distribution Analysis
| Metric | Value |
|---|---|
| Annual DPS | $1.400 |
| Current Yield | 8.99% |
| Consecutive Growth Years | 0 |
| 1-yr DPS CAGR | +0.0% |
| 3-yr DPS CAGR | +2.1% |
| 5-yr DPS CAGR | +6.2% |
| 10-yr DPS CAGR | — |
| Payout Ratio (DPS/EPS) | N/M (negative earnings) |
| FCF Payout Ratio | 76.5% |
| Sustainability Verdict | At Risk ⚠️ |
DPS frozen at $1.40 since Q3 FY2023. TTM EPS is -$0.21 — payout ratio is technically undefined as earnings are negative. FCF payout of 76% (FCF/share $1.83 TTM) is the only coverage metric that holds water. TTM EBITDA collapsed to near zero (-$14M) due to heavy impairment charges; if normalized EBITDA of ~$1.5B is the right run-rate, FCF coverage remains intact but thin. Net debt of ~$8B against a market cap of ~$7.5B is the core risk — the company cannot afford a dividend cut optically, but any further EBITDA deterioration makes it unavoidable. Wells Fargo downgraded to Sell on March 12, 2026 with a $15 PT specifically citing dividend cut risk.
🔮 Analyst Forecast Section
(a) EPS Consensus
| Year | Low / Actual | Avg | High | # Analysts | Type |
|---|---|---|---|---|---|
| 2023 | $1.42 | — | — | — | Actual |
| 2024 | $0.72 | — | — | — | Actual |
| 2025 | $2.40 | — | — | — | Actual |
| 2026 | $1.66 | $1.74 | $1.83 | 19 | Estimate |
| 2027 | $1.70 | $1.82 | $1.97 | 19 | Estimate |
(b) Revenue Consensus
| Year | Low / Actual | Avg | High | # Analysts | Type |
|---|---|---|---|---|---|
| 2023 | $12.3B | — | — | — | Actual |
| 2024 | $12.1B | — | — | — | Actual |
| 2025 | $11.6B | — | — | — | Actual |
| 2026 | $10.8B | $11.3B | $11.9B | 19 | Estimate |
| 2027 | $10.8B | $11.2B | $11.8B | 19 | Estimate |
(c) Individual Analyst Price Targets
Consensus: Avg $19.29 | Range $15–$26
| Analyst | Firm | Rating | PT | Upside |
|---|---|---|---|---|
| Street High | Various | Buy | $26 | +67.1% |
| Megan Alexander | Morgan Stanley | Hold | $19 | +22.1% |
| Bryan Adams | UBS | Hold | $18 | +15.7% |
| Steve Powers | Deutsche Bank | Hold | $18 | +15.7% |
| Chris Carey | Wells Fargo | Sell | $15 | -3.6% |
(d) Earnings Surprise History
| Quarter | EPS Act vs Est | EPS Beat/Miss | Rev Act vs Est | Rev Beat/Miss | Guidance |
|---|---|---|---|---|---|
| Q3 FY2025 | $0.71 vs $0.68 | +$0.03 ✅ | $2.9B vs $2.9B | +$0.0B ✅ | Maintained |
| Q4 FY2025 | $2.40 vs $2.35 | +$0.05 ✅ | $3.0B vs $2.9B | +$0.0B ✅ | Guidance range maintained |
| Q1 FY2026 | $0.45 vs $0.50 | $-0.05 ❌ | $2.8B vs $2.8B | $-0.0B ❌ | Lowered |
| Q2 FY2026 | $0.52 vs $0.48 | +$0.04 ✅ | $2.8B vs $2.8B | +$0.0B ✅ | Maintained |
(e) Confidence Band Commentary
FY2026E consensus of $1.74 EPS assumes heavy TTM impairment charges are non-recurring and EBITDA normalizes to ~$1.5B — a reasonable assumption but not certain. The wide gross margin deterioration to 24.6% TTM (from 27.7% FY2024) is the key risk to estimates: if margin compression is structural rather than temporary, FY2026 EPS could undershoot. Wells Fargo's March 12 downgrade to Sell ($15) specifically flags dividend cut risk as a catalyst for further de-rating. 14 analysts cover CAG (2 Buy, 10 Hold, 2 Sell, 1 Strong Sell) — the skew toward Hold reflects uncertainty rather than conviction.
⚖️ DDM Verdict: REDUCE — Conagra Brands (CAG)
Current price: $15.56 | Analyst Avg PT: $19.29
$12
🔴 Bear
$18
📊 Base
$21
🚀 Bull
| Tier | Price | Action |
|---|---|---|
| Tier 1 — Starter | ≤$16 | Begin position |
| Tier 2 — Add | ≤$15 | Add on weakness |
| Tier 3 — Full | ≤$12 | Full allocation |
| Sell Alert | ≥$18 | Above fair value — consider trimming |
How tiers are set: Tier 1 = Base IV × 0.92 (8% discount to base case). Tier 2 = midpoint of Bear & Base IV (building on meaningful weakness). Tier 3 = Bear IV × 1.05 (just above worst-case — maximum margin of safety). Sell alert = Bull IV × 0.85 (15% discount to bull case — above fair value range).
📂 Current Position Summary
| Metric | Value |
|---|---|
| Shares Held | 7,877.81 |
| Average Cost Basis | $26.72 |
| Current Market Value | $122,579 |
| Unrealized P&L | $-87,916 (-41.8%) |
| Annual DPS | $1.400/yr |
| Annual Dividend Income | $11,029/yr |
| Current Yield (at price) | 9.00% |
| Yield on Cost | 5.24% |
| vs Target (~$200K) | $122,579 / $200,000 (61%) |
Bore Family Office • Analysis generated by Lurch • Not investment advice.