What Is Driving Our $154 Price Estimate For International Flavors & Fragrances Inc?

by Trefis Team
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International Flavors & Fragrances Inc (NYSE: IFF) engages in the manufacture and supply of flavors and fragrances used in the food, beverage, personal care, and household products industries. During the previous annual earnings, the company’s revenue grew by 9% at $3.6 Billion y-o-y for the full year, over 2017’s $3.3 Billion, driven by meaningful organic growth across both its segments. The major factors that drove the top line was the 9.1% growth for both the Flavor and Fragrance segments coupled with the strong benefits reaped from cost and productivity initiatives and value-enhancing acquisitions done by IFF during the year. For 2018, The company is more then ever committed to deliver innovation that is truly differentiated, generate higher returns via continued cost and productivity initiatives, and ultimately generate strong returns for their shareholders.

Keeping in mind the management’s focus on growth initiatives, we anticipate the company to post progressive results in the future. Our price estimate of $154 is dependent on a FY18 sales forecast of $3.6 bn, up 6.4% from $3.3 bn last fiscal. We also expect net income margin to be ~13.8 %, Price-to-Earnings multiple of 24.4 and an average share count of  79.4 mn giving a share price estimate of $154, roughly 11% above its current market price.

 
Our revenue estimate of $3.6 bn for FY2018 is arrived at by projecting revenues for both segments of the Company:  Flavor Segment and the Fragrance Segment, which  represents the total net sales, and following historical growth trends and the percentage contribution of each segment to total to the company’s top line.
 

The P/E multiple is also forecast taking into account the historical data and its likely trend. Detailed steps to arrive at our price estimate are outlined in our interactive dashboard Is the Market Pricing International Flavors & Fragrances Inc Fairly? You can modify our assumptions to arrive at your own price estimate for the company.

 

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