Time horizon is always an important detail in investments – you can be right about the short-term outlook for a company (or stock) and wrong about the long-term, or vice versa, and lose money on what was otherwise a sound idea.
In the short term, it seems like the market has serious misgivings and doubts about the benefits that International Flavors and Fragrances (IFF) can reap from its large merger with DuPont’s (DD) Nutrition and Bioscience business. Indeed, there is a lot to prove here, including whether the revenue and R&D synergies will be real, whether the company can hit its margin targets, and whether the deal will fundamentally upgrade IFF’s long-term growth outlook versus its prior standalone potential.
I have my own doubts about the deal, but it seems as though the pessimism is excessive. Long-term revenue growth in the 3% to 4% and mid-teens FCF margins can support a fair value comfortably above today’s price (and a long-term annualized total return in the double-digits), and those inputs assume that the company comes in short of its own post-merger targets.
Follow the link to the full article:
For Now, The Market Seems Skeptical That International Flavors And Fragrances' Big Deal Will Pay Off
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