For the examination of Kellogg (K), we will use the same data we used in this chapter for the valuation of General Mills (GIS). However, in this case, we will assume GIS is appropriately valued by the market and use its observed market valuation to estimate the value of K.

CE8.18 Using the data in Exhibit 8.5 for GIS, CPB, and SJM, estimate the value per share of K using an NOPAT multiple. Additional information for the process is that the operating value and equity value of GIS are $46,409 and $30,735, respectively. Determine whether, based on this estimate, K is over- or underpriced at its May 1, 2019 price of $59.39. Discuss the validity of the result and what drives your conclusions. EXHIBIT 8.5 Data for Valuation Using Income Statement Multiples GIS CPB SJM (in millions) Operating value Equity value NOPAT..... Net income NFL (NFA) Common shares outstanding .... $ $ $ 1,866 $ 1,563 $15,674 599 shares $29,831 $20,430 $ 1,531 $ 1,344 $ 9,401 344 shares $21,099 $11,534 $ 156 $ (164) $ 9,565 301 shares $20,004 $13,967 $ 736 $ 629 $ 6,037 114 shares