Tyson Foods, Inc. (TSN)

Total return at 5 years: 12.8%/year = 9.2% appreciation + 3.6% dividend. The target price ($80) is ex-dividend; the $11 in dividends collected over 5 years are added separately.

By both methods, the value today (DCF $86 · Multiples $74) exceeds the market price ($51).

Today — fairly valued: at $51 trades ~30.1% below its value discounted to today (~$74); the discount is positive but does not reach the margin of safety we require (≥38%).

At 5 years — Infravalorado: the target price ($80) plus dividends yield above the required average return (10%) — the business compounds.

The bridge: the return at 5 years exceeds the risk-free rate (4.5%) — but the discount does not reach the required margin of safety (≥38%). To require a 15% annual return, it would need to be bought at ~$47.

Educational / informational. Does not constitute investment advice.

The inverse approach: instead of projecting growth to obtain the value, the market price ($51) is taken as given and it solves for what annual owner-earnings growth would need to hold for 5 years for the present value —at the method's rate (4.5%, no-growth terminal)— to equal that price. It is the disconfirmation test: the expectations the price already pays for, contrasted against the method's projection.

The market discounts less growth (-4.2%/year) than we project (4.5%/year) → if the base case holds, there is margin: perception is more pessimistic than the estimated reality.

That growth implies ~$1.1 bn of owner earnings in year 5 (vs ~$1.7 bn of our base case). It recalculates if the DCF assumptions are edited.

Year-by-year projection of the selected scenario. From each year, two versions of the flow are derived: growth FCF (operating flow − total capex, the cash surplus) and maintenance FCF (the owner earnings: what the business yields if it only sustains its capacity). The flow is returned almost in full (dividend + buyback) or redeployed into the operation, so that EV stays roughly flat and multiples compress because the metric grows, not because of cash accumulation. The valuation is done on EV/EBIT (resultado operativo ajustado). In edit mode, revenue, margins, capex, and exit multiples can be adjusted.

Year 0 is the trailing year ended June 27, 2026. Operating income is normalized to an adjusted basis (non-GAAP, the one the company itself reports and guides to): adjusted trailing year ≈ adjusted fiscal 2025 (US$1,098 million GAAP + US$847 million of legal charges, restructuring, product recall and brand discontinuation, cited in the 10-K) − adjusted nine months of 2025 (US$1,679 million, as reported) + adjusted nine months of 2026 (US$1,616 million, as reported) = US$1,882 million, 3.4% margin. GAAP for the trailing year is US$1,257 million (2.3% margin), depressed by US$248 million of legal charges and US$175 million of restructuring recognized in the nine months elapsed. Year +1 anchors on the August 3, 2026 release's two guidance anchors: consolidated revenue of +2.5%/+3.5% for fiscal 2026 (midpoint 3.0%, applied over the trailing window for simplicity, since the guided fiscal year —October 2025 to September 2026— does not exactly match the rolling window) and consolidated adjusted operating income of US$2,100 to US$2,300 million (midpoint US$2,200 million, 3.9% margin), supported by Chicken (US$1,900-2,050 million) and Prepared Foods (US$1,300-1,350 million) while Beef worsens (adjusted loss of US$500-650 million, larger than the prior fiscal year). Year 5 decelerates revenue to 2.5% and expands the margin moderately (4.3%) because a full recovery of the cattle cycle within the horizon is not assumed. Cash is not accumulated: the excess flow is redeployed into debt reduction, which already fell US$824 million in the first nine months of fiscal 2026 (reinvestsExcess).

Today's elevated multiple is the price of growth: if the business grows, the entry point cheapens on its own going forward (the metric grows while EV stays roughly flat). The exit multiple at 3 years is higher than the terminal at 5 years —at 3 years there is more growth still ahead—, so the value curve shows whether value creation is concentrated in the early or the later years. The required return is applied to the base scenario.

They are valued separately, with their own rationale, and are not incorporated into the base or the verdict (they are excess return). When assigning them value — in Editmode —, the total with optionalities updates live, without moving the base.

The verdict, the base CAGR, and the margin of safety are always calculated on the base; optionalities do not alter them (with optionalities at $0 they do not move).

Each card fixes a required annual return and answers: if the business is worth $80 in 5 years, what is the maximum that can be paid today to obtain that return? Since it now trades at $51, the margin of safety is how much cheaper the market is than that maximum. The three thresholds: 4% covers inflation (the floor), 10% is the long-term average return, and 15% is the level of a great investment.

With a target price of $80 in 5 years plus $11 of dividends collected (the dividend adds to the return, not to the price) and a required return of 4.5% annually, the maximum to pay today is $74. Against the current market price ($51), the margin of safety is 30.1% (trades below the maximum → there is margin) and the total return at that price would be 12.8% annually.

• Multiple vs. quality. 14× adjusted operating income, in the lower third of the range for an industrial protein processor, consistent with return on capital below the bar.
• Reverse-DCF. The implied price requires operating income growth close to the base scenario, with no evident additional margin.
• Margin of safety. It trades at a real discount to value, though short of the required margin of safety. The +13% total return depends on Chicken and Prepared Foods continuing to offset the Beef loss.

Each margin over sales, year by year: historical (solid line) → projection (dotted).

• ✕ ROIC exceeds the cost of capital (~10%)
• ✓ CFROIC backs up the ROIC (111%, cash vs. accruals)
• ✕ Healthy balance sheet (low corporate debt)
• ✓ Durable competitive moat (multiple advantages)

• ROIC above the cost of capital. Return on invested capital (5.6%) falls below the 10% bar, weighed down by goodwill from historical acquisitions and the Beef down-cycle.
• Margin and stability. Consolidated operating margin in the order of 2-4%, among the thinnest in consumer staples, and volatile due to the cattle cycle.
• Cash quality. The trailing year's free cash flow (approximately US$1,161 million on a GAAP basis) is in line with adjusted net income; no signs of aggressive accruals.

Annual levels from the official filing (10-K); the % over each bar is the year-over-year (YoY) growth vs the prior year.

Each segment's engine is volume by price and mix. In the first nine months of fiscal 2026, Beef fell 12.0% in volume and rose 13.4% in price (the cattle cycle forces passing through the cost of cattle); Pork rose 3.7% in volume and 0.9% in price; Chicken rose 2.1% in volume and 1.3% in price, with seven consecutive quarters of growth; Prepared Foods barely grew in volume (+0.2%) and rose 4.6% in price/mix; International fell 1.8% in volume and rose 4.9% in price. The August 3, 2026 guidance expects total domestic protein production (USDA) to rise just 1% in fiscal 2026.

The % are the annual (year-over-year) growth: each year —historical and projected— vs the prior one; the TTM (trailing 12m) vs the TTM of a year ago, to avoid overlapping windows. The historicals are exact figures from the official filings; the projected years come from the year-by-year model (the intermediate years without their own series are interpolated between the anchors). The projected columns (+1y…+5y) are 12-month windows counted from the TTM close (27-jun-2026): the projection starts from the most recently reported data, not the fiscal year. The projected base is realistic and unbiased — the risk discount is applied at the end, via the required return. The rationale for each metric is in the (i).

• Real, not nominal. Nine-month revenue growth (+3.1%) combines slightly negative consolidated volume (-1.8%) with positive price and mix (+4.6%); it is not pure organic volume.
• Growth engine. Chicken and Prepared Foods (value-added mix) sustain growth; Beef subtracts due to the cattle cycle, with volume down 12.0% for the year.
• Deceleration and cycle. Guidance raises the fiscal year's adjusted operating income, but worsens the expected Beef loss: aggregate growth depends on two segments offsetting a third that is declining.

• Relevant in 10 years (recurrence). Animal protein is a daily, recurring consumer staple; Tyson is one of the largest processors in the world.
• Pricing power. Limited in Beef and Pork (price-taking commodities); greater in value-added Chicken and Prepared Foods, where brands allow some pricing power.
• Moat and its direction. Narrow and stable: vertical integration in chicken and brands in Prepared Foods, but Beef and Pork are essentially commodities with no moat.
• Capital cycle. The cattle cycle (cattle supply, USDA production) dominates Beef profitability with a multi-year boom-and-bust pattern, outside the company's control.

Not all debt is equal: only the structural needs refinancing; the rest is operational (self-liquidating).

Structural debt is what is exposed to the contraction phase of the cycle; operational debt (leases, matched funding) self-liquidates with the business.

• !Leverage (net debt / EBITDA)Net debt / EBITDA 2.2x
• !Interest coverage (EBIT / interest)5.2x
• –Liquidity (current ratio)no data
• ✓Cash quality (CFROIC vs ROIC)CFROIC backs 111% of ROIC
• ✕Value creation (ROIC − 10% bar)-4pp
• ✓Malinvestment test (capex vs incremental ROIC)Capex/D&A 0.6x — no over-investment
• !Float / working capitalConsumes cash $0.4 bn (positive WC)
• ✓Dilution (SBC % of revenue + shares)SBC 0.2% of revenue

A traffic-light interpreted by the method (not generic): float (negative WC) adds up, capex is judged by incremental ROIC (malinvestment test), and a lender is not subjected to corporate solvency. The (i) shows the derivation of each number.

• Leverage. Total debt of US$8,006 million against equity of US$18,079 million; the company reduced debt by US$824 million in the first nine months of fiscal 2026.
• Coverage and cash. Total liquidity of US$4,000 million at the close of the quarter, well above the company's own stated minimum target of US$1,000 million.
• Balance sheet cyclicality. The Beef down-cycle pressures the segment's cash flow; the company offsets it with cash generated by Chicken and Prepared Foods.

Who owns the shares — the alignment and whether there is a controlling shareholder.

• Skin in the game. Strong control by the Tyson Limited Partnership and the Tyson family (71.94% of voting power via a dual-class structure); long-term alignment but with less external governance discipline.
• Capital allocation. Recent priority on debt reduction (US$824 million in nine months) alongside a sustained dividend and modest buybacks; no material M&A in the period.
• Integrity / normalization. The company transparently reconciles its nonrecurring charges (litigation, restructuring, product recall) in the non-GAAP results note.

• The GAAP result for the trailing year (US$574 million net income, 1.0% margin) is depressed by legal charges, restructuring and an impairment of equity investments, and makes the business look considerably less profitable than it is on an adjusted basis.
• The market also rightly discounts the Beef down-cycle: the company itself guides to a larger adjusted loss in fiscal 2026 than in the prior year, a genuine headwind and not one perceived as worse than it is.
• There is no clear discount source beyond the cycle: Chicken and Prepared Foods have been executing well (seven consecutive quarters of growth in Chicken) and consolidated guidance is rising, so much of the multiple discount appropriately reflects the cyclicality and thin margin of the business.

The projected total return (+13%) moderately rewards the cyclical Beef risk, without being an obvious bargain: Undervalued.

The annual return (CAGR at 5 years) in each scenario, with the total period return below — the margin of safety made visual: upside range wide, downside range narrow.

Even in the bear scenario, the return holds at ~0%/year (+2% total): the margin of safety protects the downside. The bull (+24%/year, +188% total) exceeds it comfortably — a favorable asymmetry, with a narrow downside range and a wide upside range.

• Beef cattle cycle. The USDA projects a 3% decline in domestic beef production in fiscal 2026, and the company guides to a larger adjusted Beef operating loss than the prior year.
• Animal diseases. Outbreaks of avian influenza, African swine fever or screwworm can force culling, close export markets and damage consumer perception.
• Walmart concentration. Walmart represents approximately 18.7% of consolidated sales in fiscal 2025, a single customer with material weight across the four segments.
• Tyson Limited Partnership control. The Tyson family controls approximately 71.94% of voting power, which may discourage a change of control that other shareholders would favor.

Each thinker's analytical framework applied to our data.

• Buffett / Graham Quality + margin of safety

  Fails the quality gate: ROIC 6% does not clear the 10% bar.

• Peter Lynch Growth at a reasonable price (GARP)

  A stalwart growing 5% at a multiple/growth of 3.0 → expensive for its growth.

• Joel Greenblatt Cheap and high-return (Magic Formula)

  Earnings yield 7% (EBIT/EV) + ROIC 6% → falls outside the Magic Formula.

• Howard Marks Perception vs reality + cycle

  The price discounts -4% vs our 5%: perception is more pessimistic than reality, with an identified source of the discount.

• Seth Klarman Capital protection (bear scenario)

  Bear-scenario floor -4%/yr, bull-scenario ceiling +21%/yr over 5y: reasonable asymmetry, without an ample cushion.

• Pat Dorsey Moat strength (Five Rules)

  A narrow moat, stable; sources: efficient scale, intangibles, cost advantage → partially passes the Five Rules.

• Aswath Damodaran Expectations implied by the price

  Justifying the price requires discounting -4%, within what we project (5%) — the story squares with the numbers.