What is SENEA's Intrinsic value?

Seneca Foods Corp (SENEA) Intrinsic Value Analysis

Executive Summary

As of May 27, 2025, Seneca Foods Corp's estimated intrinsic value ranges from $20.64 to $143.28 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $109.21 +19.4%
Discounted Cash Flow (5Y) $20.64 -77.4%
Dividend Discount Model (Multi-Stage) $143.28 +56.6%
Dividend Discount Model (Stable) $78.03 -14.7%

Is Seneca Foods Corp (SENEA) undervalued or overvalued?

With the current market price at $91.48, the stock appears to be fairly valued.

Understanding Intrinsic Value

Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate Seneca Foods Corp's intrinsic value, including:

  1. Discounted Cash Flow (DCF): Values the company based on projected future cash flows
  2. Dividend Discount Model (DDM): Values the company based on expected future dividend payments

Weighted Average Cost of Capital (WACC)

The cost of capital is a critical factor in valuation models, representing the required return for investors.

WACC Component Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 0.51 0.57
Cost of equity 6.2% 8.1%
Cost of debt 4.8% 9.1%
Tax rate 22.5% 23.2%
Debt/Equity ratio 1.01 1.01
After-tax WACC 5.0% 7.5%

Valuation Methods

1. Discounted Cash Flow (DCF) Valuation

Our DCF model projects cash flows over 5-year and 10-year horizons, with the following key assumptions:

  • Forecast Period: 5-year DCF and 10-year DCF
  • Terminal Growth Rate: 0.0% (range: 3.0% - 5.0%)
  • Discount Rate: 6.2% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $1,459 (FY03-2024) to $2,984 (FY03-2034)
  • Net profit margin expansion from 4% to 4%
  • Capital expenditures maintained at approximately 4% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $21 $676M 71.5%
10-Year Growth $109 $1,285M 65.2%
5-Year EBITDA $151 $1,571M 87.8%
10-Year EBITDA $203 $1,930M 76.8%

2. Dividend Discount Model (DDM)

The DDM values a company based on its expected future dividend payments. We used two approaches:

Multi-Stage DDM:

  • Current payout ratio: 0.1%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 7.1%
  • Long-term growth rate: 0.5%
  • Fair value: $143.28 (56.6% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 8.1% (Low) to 6.2% (High)
  • Long-term growth rate: 0.0% (Low) to 1.0% (High)
  • Fair value range: $52 to $104
  • Selected fair value: $78.03 (-14.7% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $629M
Enterprise Value $1163M
Trailing P/E 15.21
Forward P/E 9.52
Trailing EV/EBITDA 8.00
Current Dividend Yield 0.56%
Dividend Growth Rate (5Y) 0.00%
Debt-to-Equity Ratio 1.01

Investment Decision Framework

To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:

  1. Forecast Certainty: DCF methods rely on long-term projections, while earnings power value focuses on current normalized earnings
  2. Business Model Alignment: Dividend models are more appropriate for mature companies with established dividend policies
  3. Historical Accuracy: How well each method has predicted fair value historically

Valuation Weight Matrix

Valuation Method Weight Weighted Value
Discounted Cash Flow (10Y) 33% $32.76
Discounted Cash Flow (5Y) 28% $5.16
Dividend Discount Model (Multi-Stage) 22% $28.66
Dividend Discount Model (Stable) 17% $11.70
Weighted Average 100% $86.98

Investment Conclusion

Based on our comprehensive valuation analysis, Seneca Foods Corp's weighted average intrinsic value is $86.98, which is approximately 4.9% below the current market price of $91.48.

Key investment considerations:

  • Strong projected earnings growth (4% to 4% margin)
  • Consistent cash flow generation

Given these factors, we believe Seneca Foods Corp is currently fairly valued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.