The average target price of KLG is 18 and suggests 22% downside potential. Usually, this means a SELL recommendation among investment firms, or a recommendation to decrease one's position in this instrument in the next 12 months. The most optimistic analyst has a target price of 28.0. This translates into 22% upside potential in the best case. On the other hand, the most pessimistic analyst has a target price of 14.0. This is equivalent to 39% downside potential in the worst case. 

WK Kellogg Co operates as a food company in the United States, Canada, and the Caribbean. It offers ready-to-eat cereal products primarily under the Frosted Flakes, Special K, Froot Loops, Raisin Bran, Frosted Mini-Wheats, and Kashi brands. The company was formerly known as North America Cereal Co. and changed its name to WK Kellogg Co in March 2023. The company was incorporated in 2022 and is based in Battle Creek, Michigan.

WK Kellogg Co

Consumer Cyclical

The company pays dividends irregularly. There have only been a few years with dividend payments in the past ten years. Dividend per share (DPS) has grown yearly, but the dynamics are somewhat mixed. In the past 12 months, the dividend yield has been good and slightly above its peers. At the same time, the average five-year yield has been significantly lower, at very close to zero. On average, the company pays dividends annually. 

KLG reported revenue of USD 2 664mn in the last 12 months, down 2% from FY24. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS fell 23% from FY24 to USD 0.65. Market expects EPS to reach USD 1.50 in FY25.

The stock's performance has been mixed in the past six months, with growth following a decline. There is no clear price trend compared to its global peers from the same sector and industry (as shown above). The stock has outperformed this peer group by 5ppts over past six months and grown 10ppts faster in the past month. This is largely true for peers from the same country and sector. With respect to the stock's valuation against its peers, its overall price performance is neutral.

The company has reported weak EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 6.2% in the last 12 months, a decline from 12.1% in FY23. 

Historically, KLG has reported weak net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 2.1%, down from 3.5% in FY23. 

In the last 12 months, the return on capital employed (RoCE) declined to 5.1%, below the peers. The consensus estimate for FY24 for RoCE is 19.0%, however, this time ahead of the peers. 

WK Kellogg Co reported a return on equity (RoE) of 18.2% in the last 12 months, down from 19.7% in FY23. The market consensus projects an RoE of 24.3% in FY24, again ahead of its peers. 

Another important profitability metric, return on assets (RoA), amounted to 2.9% in the last 12 months, a decrease from 5.8% in FY23. The market analysts predict that RoA will be 3.9% in FY24, again weaker than its peers. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 0.7 in the past several years. This ratio implies a poor shareholder value creation. 

The institutional, legal, and compliance risks associated with the company's country are minimal. In combination with stringent business standards, shareholder rights are very highly protected.

KLG has above average trading liquidity. The average private investor can sell his common position in the stock immediately. Liquidity is unstable and remains extremely favourable on the days with the lowest activity. However, please consider that under highly turbulent market conditions, the trading volume tends to decrease significantly. 

No other major risks have been identified.

The risk of default is moderate. We note solid return on capital, low margin volatility, and solid cash flow generation, among the positive credit factors. Among the negative credit factors and we point to slow historical revenue growth, bleak profitability.

In highly turbulent market conditions, KLG is as volatile as an index. In other words, the stock will move with the index in times of extreme market volatility or shocking company news. Standalone, the worst-day losses (less than 1% of the time) will likely be limited. 

In normal market circumstances, KLG is moderately volatile. Put differently, without outstanding market volatility or shocking company news, the stock's price will move slightly wider than the index. The stock's losses on its worst days (less than 1-5% of the time) will range from large to notable. 

Considering past and projected metrics, the stock is moderately 'expensive' compared to its peers. Specifically, the stock is fairly valued on P/E, overvalued on EV/EBITDA, reasonably priced on P/FCF. 

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WK Kellogg Co

$ 22.89

5

WK Kellogg Co

$ 22.89

5

Risk factor

Profitability factor

Risk / Profitability

About

About

Risk factor

Profitability factor

$ 22.89

About

About

WK Kellogg Co

$ 22.89

5

WK Kellogg Co

$ 22.89

5

Risk factor

Profitability factor

Risk / Profitability

About

About

Risk factor

Profitability factor

$ 22.89

About

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