HRL, Hormel Foods Corporation
The Foodservice segment consists primarily of the processing, marketing, and sale of food products to distributors and operators across a wide range of providers of food away from home, including restaurants, hospitality, healthcare, K-12, college and universities, and convenience stores in the U.S.
Read top to bottom, the owner's questions in the order an owner asks them: what the business is, whether the record holds, whether it survives and is any good, and what you would be paying. New to the questions? Start with the Method.
The business in brief
read the 10-K →What this business is and what moves its needle, read from the numbers in its filings. The quantitative detail is in the sections below; the verdict is left to you.
- What it is
- Revenue is Perishable (73%) and Shelf-stable (27%).
- What moves the needle
- Volume against price, and shelf position. What decides it: whether it can raise prices without losing the customer, and whether the brand still commands its margin.
- Is it a good business?
- Return on capital has sat near the cost of capital (median 10%). Owner earnings agree: roughly 7% of revenue reaches owners as cash, consistently. This is price-taker territory, where the balance sheet and the cycle matter more than any multiple; the 10-K is where you look.
Every line here is arithmetic from the company's own filings, not a model's opinion, and each figure appears in full in the sections below.
Where the money comes from
read the 10-K →Perishable is 73% of revenue, so this is largely a single-line business.
- Perishable73%$8.8B
- Shelf-stable27%$3.3B
From the segment footnote of the company's own 10-K. Shares are of total revenue; the profit bar shows each segment's share of segment operating profit, before unallocated corporate costs.
The record, 2016–2025
realized figures from each filing, no estimates| 2016’16 | 2017’17 | 2018’18 | 2019’19 | 2020’20 | 2021’21 | 2022’22 | 2023’23 | 2024’24 | 2025’25 | TTMTTMApr 2026 | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| RevenueRevenue | $9.5B | $9.2B | $9.5B | $9.5B | $9.6B | $11.4B | $12.5B | $12.1B | $11.9B | $12.1B | $12.2B |
| Gross marginGross mgn | 23% | 22% | 21% | 20% | 19% | 17% | 17% | 17% | 17% | 16% | 16% |
| Operating marginOp. mgn | 13.9% | 13.9% | 12.4% | 12.6% | 11.5% | 9.9% | 10.5% | 8.9% | 9.0% | 5.9% | 5.8% |
| Net incomeNet inc. | $890M | $847M | $1.0B | $979M | $908M | $909M | $1000M | $794M | $805M | $478M | $467M |
| EPS (diluted)EPS | $1.64 | $1.57 | $1.86 | $1.80 | $1.66 | $1.66 | $1.82 | $1.45 | $1.47 | $0.87 | $0.85 |
| Owner earningsOwner earn. | $784M | $813M | $852M | $629M | $761M | $770M | $856M | $778M | $1.0B | $534M | $693M |
| ROICROIC | 21% | 18% | 18% | 18% | 15% | 9% | 10% | 8% | 8% | 5% | 5% |
| Cash & investmentsCash+inv | $415M | $444M | $459M | $688M | $1.7B | $635M | $998M | $753M | $767M | $704M | $860M |
| Net debt / (cash)Net debt | ($165M) | ($194M) | $166M | ($438M) | ($428M) | $2.7B | $2.3B | $2.6B | $2.1B | $2.2B | $2.0B |
| Dividends / shareDiv/sh | $0.55 | $0.64 | $0.71 | $0.80 | $0.89 | $0.96 | $1.02 | $1.08 | $1.12 | $1.15 | — |
| Book value / shareBVPS | $8.20 | $9.16 | $10.30 | $10.86 | $11.76 | $12.73 | $13.71 | $14.09 | $14.56 | $14.35 | $14.43 |
Owner’s Scorecard
Will it survive?
- ComfortableOperating income $719M ÷ interest expense $78M
Operating profit covers interest with the kind of margin Graham wanted for a defensive holding. Necessary, not sufficient, it says solvent, not cheap.
- ModerateTotal debt $2.9B ÷ operating income $719M
Years of operating profit it would take to repay all debt. A first read, not a credit rating: it's gross debt (not netted against cash) over EBIT (not EBITDA), and a cyclical year distorts it.
- Debt, net of cash $2.2BMeaningful net debtCash $671M + ST investments $33M − debt $2.9B
Netting $704M of cash and short-term investments against $2.9B of debt leaves $2.2B owed, about 3.0× a year's operating profit, versus the gross figure above. Net debt is the leverage figure that matters; the gross ratio above ignores the cash already set against it. Strategic or illiquid investments aren't counted here.
- TightDSO 24 + DIO 62 − DPO 26 days
Days cash is tied up between paying suppliers and collecting from customers. Lower is better; a long cycle means growth itself eats cash.
Is it a good business?
- Below averageNOPAT $518M ÷ invested capital $10.1B (debt + equity − cash)
The rate the business earns on the money tied up in it, Buffett's north star, because over time a stock tracks the ROIC beneath it. Above ~15% sustained hints at a moat; below ~8% the company may destroy value as it grows. Asset-light businesses (R&D expensed, little capital) read artificially high, pair this with Owner Earnings.
- ThinOwner Earnings $534M = operating cash $845M − capex $311M
What an owner could take out without starving the business. That's 4% of revenue. Treating stock comp as the real expense it is (less $26M of SBC) leaves $509M. Honest caveat: capex here blends maintenance and growth, so steady-state Owner Earnings may run higher (see capex vs. depreciation).
- Cash-backedCash from ops $845M ÷ net income $478M
How much of reported profit showed up as operating cash. Above 1× is reassuring; well below suggests earnings lean on accruals. One year is noisy, growth and working-capital swings distort it, and this is operating cash, not free cash. Watch the multi-year trend.
How is the cash used?
- Returns most of itDividends + buybacks $633M ÷ Owner Earnings $534M
Of $534M Owner Earnings, $633M (118%) went back to shareholders, $633M dividends, $0 buybacks. Returning most of it signals a mature cash machine; reinvesting most could mean a long runway, or empire-building. The split doesn't say which; the return earned on it (see ROIC) does.
- Investing or harvesting? 1.18×MaintainingCapex $311M ÷ depreciation $264M
Descriptive, not a grade. Above ~1× means investing faster than assets wear out (growth, or, sustained for years, today's earnings carrying less depreciation than tomorrow's will). Below means spending less than it's wearing out (efficiency, or a melting asset base). The ratio won't tell you which; the filings will.
Durability & moat, 2016–2025
A moat is a high return that doesn’t fade, reinvested at high returns. Here is what the record says, judgments, not another chart of the numbers.
- Profitable years 10 of 10
Never lost money over the record, the earnings stability Graham insisted on.
- Return on capital ≥ 15% 4 of 10 yrs
A moat shows up as a high return on invested capital that holds year after year, not one good vintage.
- Operating margin 14% (FY2016) → 6% (FY2025)
Margins slipped over the record, competition or costs are biting in.
- Reinvestment, incremental ROIC −4%
Reinvested capital earned a negative return, the business spent money to shrink its own economics.
- Owner earnings growth −0%/yr
Free cash to owners shrank about 0% a year over the record.
- Worst year 2025 · 5.9% op. margin
Stayed profitable even in its hardest year, the resilience that survives recessions.
- Share count +0.2%/yr
Roughly flat share count, little dilution, little buyback.
- Dividend record rising
Paid and raised the dividend across the record, the continuity Graham prized.
Solvent is not the same as cheap; growing is not the same as good. These are vital signs, not a verdict, the judgment is yours, and the filing is one click away.
How the cash was used, 2016–2025
Over the record, the business generated $10.7B of operating cash, and how management split it is, as Buffett insists, the job that matters most. Here it reads as a balanced allocator, splitting cash between the business, owners, and the balance sheet.
- Reinvested$2.9B · 27%
- Dividends$4.9B · 46%
- Buybacks$448M · 4%
- Retained (debt / cash)$2.5B · 23%
It reinvested $2.9B (27%) back into the business and returned $5.3B (50%) to owners, $4.9B in dividends, $448M in buybacks. Total debt rose $2.6B across the span.
Buybacks are gross of stock issued to employees; net of that, the real return to owners is lower (see Management & pay). And the mix alone doesn't grade management, what matters is the return earned on the dollars reinvested (see incremental ROIC in the durability report).
Management & pay
Two questions Buffett actually asks about pay: is stock compensation, a real expense, whatever the income statement pretends, quietly large, and is the top wildly out of line with the floor. He's no populist about it; he just wants pay that's rational and earned, and comp committees that aren't lapdogs.
- Stock-based compensation$26M
The slice of the business handed to employees in shares this year, 0% of revenue, equal to 4% of operating profit. Buffett's oldest accounting fight: this is compensation, compensation is an expense, real whether or not the headline earnings admit it. And note the trap, the cash-flow statement adds SBC back, so the operating cash, and the owner earnings drawn from it, are flattered by exactly this amount; counted as the cost it is, what an owner keeps is lower.
Graham’s defensive-investor test
4 of 6 metGraham gave the defensive investor seven numerical criteria in The Intelligent Investor. Here they are, run mechanically on the filings, his framework, not our verdict. Meeting them is a floor of safety, not a reason to buy; missing one is no veto, since many fine modern businesses fail his strictest liquidity tests by design. The worth is in seeing exactly where a company stands against the canon, every number sourced.
- Adequate size PassRevenue ≥ $2B · $12.1B
Big enough to weather a storm. Graham's 1972 floor was ~$100M of sales (≈ $700M today); we use a $2B revenue line as a conservative modern stand-in.
- Strong liquidity PassCurrent ratio ≥ 2× · 2.47×
Current assets at least twice current liabilities, near-term bills covered without touching the business. Strict by design: many cash-rich modern firms run leaner and miss it, holding their cushion in longer-dated securities.
- Conservative debt NearDebt ≤ working capital · $2.9B vs $2.0B WC
Graham's rule that borrowings not exceed net current assets. Capital-heavy and buyback-heavy firms routinely fail it, read it next to interest coverage, not alone.
- Earnings stability PassA profit every year (10-yr record) · no losses
Graham wanted earnings in each of the past ten years, the stability a defensive owner leans on.
- Dividend record PassUninterrupted dividends · paid every year (10)
An unbroken dividend was Graham's mark of durability. He wanted twenty years; the filings show about ten, and a single suspension breaks the streak. Non-payers, many fine modern compounders, fall outside his defensive net by design.
- Earnings growth MissEarnings +33% over the record · −24%
At least a third more earnings than a decade ago, averaging three years at each end. Net income (not per-share), so stock splits don't distort it, buybacks and dilution show up in the share-count line instead.
- Moderate price —P/E ≤ 15 and P/E × P/B ≤ 22.5 · decided by the price
Graham's valuation gate, the wall he kept between a sound business and a sound investment. Earnings are $0.87/share and book value $14.35/share. Enter a price in “What the price implies” just below for the P/E, P/B, and whether it clears. But this is the rule Buffett outgrew: there's no hard P/E law, and a wonderful business can deserve a far richer multiple if the thesis holds, treat it as the bargain-hunter's floor, not a verdict on the price.
Graham would be the first to say a checklist is a starting point, not an answer. These are his defensive, bargain-hunter's tests, the cigar-butt lens. Buffett and Munger grew past it, paying fair prices for wonderful businesses; that lens lives in the moat and owner-earnings work above, and both still matter. Clearing Graham’s tests earns a closer look; failing them earns harder questions, not a dismissal.
What the price implies
reverse-DCFA price is the one input we don't pull, you bring it. Type today's close (read it off any broker or quote site) and see the owner-earnings growth you'd have to believe to justify it, set beside what Hormel Foods Corporation has actually delivered. Nothing is stored; the number stays in your browser.
Enter a price above to run it.
Graham capped the multiple at 15×; Buffett and Munger let that rule go, a wonderful business can deserve 50× if the thesis holds. Read it as the bargain-hunter's floor, not a ceiling on good sense.
The discount rate is your interest rate, what a dollar years from now is worth today, anchored to the long-term Treasury yield (~4–5% today, plus whatever premium you want for risk). Drag it toward the risk-free rate and watch how much growth the price suddenly “needs”: interest rates are gravity on valuations.
Owner earnings $693M on 551M diluted shares; net debt $2.0B. This is a lens, not a price target, it says what you'd have to believe, not what the company is worth, and it runs on one year of (noisy) owner earnings at assumptions you can see and change.
What the filing emphasizes, FY2025
read the 10-K →Each year a 10-K must name what could go wrong, in the company's own words. Here are the ones Graham and Buffett would stop on, each set against the figure from the same filings that bears on it, anchored to a period you can find in the record above. We point; the judgment is yours.
- Customer concentrationBusiness
Who the revenue leans on. When one buyer is a large slice of sales, that buyer holds the pricing power, and its troubles become the company's.
“Sales to the Company's largest customer, Walmart Inc. and its subsidiaries (Walmart), accounted for 15.6 percent of consolidated gross sales less returns and allowances during fiscal 2025.”
From the recordRevenue exposed (TTM)$12.2B - Pricing power & competitionBusiness
Whether the company sets its price or takes it. Durable pricing power is the surest mark of a moat; price competition is the surest mark there isn't one.
“The production and sale of meat and food products in the U.S. and internationally is highly competitive.”
From the recordOperating margin5.8% now (TTM), off a 13.9% peak (FY2017) - Supplier & input dependenceBusiness
A choke point upstream. A sole or limited supplier can dictate terms, and a single shortage can stop the line.
“As the Company has shifted its focus toward a more value-added portfolio, it has become increasingly dependent on these suppliers to meet its raw material needs.”
From the recordGross-margin cushion (TTM)16% - Concentrated dependenceRisk Factors
What the whole business leans on, a product, a platform, a partner. Concentration cuts both ways, and the filing is where management has to admit it.
“The Company's results of operations and financial condition are largely dependent upon the cost and supply of pork, poultry, beef, feed grains, nuts, energy, and other inputs, as well as the selling prices for many of the Company's products, which are determined by dynamic market forces of supply an…”
From the recordOwner-earnings margin at stake (TTM)6% - Debt terms & refinancingMD&A
The fine print behind the debt. Covenants and near-term maturities decide who is really in control when a year goes badly.
“These debt covenants limit the ability of the Company to, among other things, incur debt for borrowed money secured by certain liens, or engage in certain sale and leaseback transactions, and the covenants require the Company to maintain certain consolidated financial ratios.”
From the recordBalance sheet (TTM)$2.2B meaningful net debt · interest covered 9.2× - Litigation & contingenciesMD&A
Claims an owner inherits. Most disclosure is boilerplate; this fires only on an actual matter, a named suit, a settlement, a contingency, a number.
“In fiscal 2025 and 2024, the Company entered into settlement agreements with certain plaintiffs in pending antitrust litigation.”
A judgment, not a number, weigh it against the filing yourself. - Cyclicality & demandRisk Factors
How the business behaves when the economy turns. A cyclical earns its keep across the whole cycle, not at the peak.
“Customer demand for products may not materialize to levels required to achieve the Company's anticipated financial results or may decline as distributors and retailers seek to reduce inventory positions if there is an economic downturn or economic uncertainty in key markets.”
From the recordWorst year on record5.9% operating margin (FY2025)
What changed, FY2025 vs FY2024
read the 10-K →Most of a 10-K is boilerplate carried over verbatim; the signal is in what's new. These lines appear this year and weren't there last, figure updates filtered out, so only the language shift remains.
- “During the fourth quarter of fiscal 2025, the Company recognized $71 million of intangible asset impairments related to the Planters trade name, a private label customer relationship, and the Chi-Chi's trade name, all recorded within the Retail segment.”
- “Fair value estimates used in impairment testing for the Justin's trade name assumed continued use and did not incorporate potential changes in ownership structure (see Note B - Acquisitions and Divestitures of the Notes to the Consolidated Financial Statements).”
- “In addition to the fourth quarter impacts, for fiscal 2025, net unallocated expense increased due to lower interest income, the loss on the sale of a non-core sow operation, and higher expenses related to the T&M initiative.”
- “Segment profit declined for the fourth quarter of fiscal 2025, as strong net sales growth was more than offset by impacts from a chicken-product recall and the rise in input costs, mainly due to elevated commodity markets.”
- “There have been, and may continue to be, changes in the legal or regulatory environment (including as a result of executive orders) affecting many areas related to the Company's business, including raw material costs and availability, energy costs and availability, workforce availability, transport …”
Classic text analysis over the filing itself, no model wrote a word of this, and every quote is the company's own.
Peers, Packaged food
The same industry, side by side on owner economics, compare, don't rank by a single number.● marks best in the group.
| Company | Revenue | Gross margin | Op. margin | ROIC | Owner earn. margin |
|---|---|---|---|---|---|
| KDPKeurig Dr Pepper Inc. | $16.6B | 54% | 21.5% | 7% | 9% |
| HRLHormel Foods Corporation | $12.1B | 16% | 5.9% | 5% | 4% |
| HSYHershey Co | $11.7B | 34% | 12.3% | 11% | 16% |
| CAGConagra Brands, Inc. | $11.6B | 26% | 11.8% | 8% | 11% |
| CPBTHE Campbell's Company | $10.3B | 30% | 11.0% | 7% | 7% |
| STZConstellation Brands Inc. | $9.1B | 52% | 29.8% | 11% | 20% |
| SJMTHE J. M. Smucker Company | $9.1B | 34% | 4.0% | 2% | 13% |
| MNSTMonster Beverage Corp. | $8.3B | 56% | 29.2% | 28% | 24% |