IFF, International Flavors & Fragrances Inc
We are a leading creator and manufacturer of products for application in food, beverage, health & biosciences, and scent, as well as complementary adjacent products, including natural health ingredients, all of which are used in a wide variety of consumer and end-use products.
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
- A capital-intensive business, run on heavy physical assets that have to be kept working.
- Situation
- Unprofitable growth. no operating profit yet, judge it on revenue growth, gross-margin trajectory, cash burn and runway, never on an earnings multiple. Distress / turnaround. thin interest coverage or cash-burning operations against real debt, the first questions are liquidity and the maturity wall, not growth. Cyclical. margins collapse repeatedly across the cycle, a single year misleads; look at normalized, through-cycle earnings and the balance sheet at the trough.
- What moves the needle
- How hard the assets work, and what the inputs cost. What decides it: utilization, how much of the capex merely keeps the assets running, and what a downturn does to a heavy fixed-cost base.
- Is it a good business?
- Return on capital has rarely cleared the cost of capital (median 3%, above 15% in 1 of 10 years). Owner earnings agree: roughly 8% of revenue reaches owners as cash, consistently. The cycle and the balance sheet decide this one, so weigh the worst year against the median, and read the 10-K.
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 →Revenue spreads across 4 regions, the largest EMEA at 34%.
- EMEA34%$3.7B
- North America29%$3.2B
- Asia23%$2.5B
- Latin America13%$1.4B
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 | TTMTTMMar 2026 | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| RevenueRevenue | $3.1B | $3.4B | $4.0B | $5.1B | $5.1B | $11.7B | $12.4B | $11.5B | $11.5B | $10.9B | $10.8B |
| Operating marginOp. mgn | 17.7% | 16.3% | 14.7% | 12.9% | 11.1% | 5.0% | −10.7% | −18.4% | 6.7% | −3.5% | 7.4% |
| Net incomeNet inc. | $405M | $296M | $340M | $456M | $363M | $270M | ($1.9B) | ($2.6B) | $263M | ($361M) | $826M |
| EPS (diluted)EPS | $2.38 | $1.75 | $1.81 | $1.89 | $1.49 | $1.11 | $-7.34 | $-10.16 | $1.03 | $-1.41 | $3.21 |
| Owner earningsOwner earn. | $424M | $262M | $267M | $463M | $522M | $1.0B | ($107M) | $952M | $607M | $256M | $400M |
| ROICROIC | 16% | 10% | 4% | 5% | 5% | 1% | -4% | -7% | 3% | -2% | 4% |
| CapexCapex | $126M | $129M | $170M | $236M | $192M | $393M | $504M | $503M | $463M | $594M | $580M |
| Capex / revenueCapex/rev | 4.1% | 3.8% | 4.3% | 4.6% | 3.8% | 3.4% | 4.1% | 4.4% | 4.0% | 5.5% | 5.4% |
| Capex vs depreciationCapex/dep | 1.23× | 1.09× | 0.98× | 0.73× | 0.59× | 0.34× | 0.43× | 0.44× | 0.46× | 0.62× | 0.60× |
| Total debtDebt | $1.3B | $1.6B | $4.6B | $4.4B | $4.4B | $11.4B | $11.0B | $10.1B | $9.0B | $6.0B | $6.0B |
| Cash & investmentsCash+inv | $324M | $368M | $635M | $607M | $650M | $711M | $483M | $703M | $469M | $590M | $562M |
| Net debt / (cash)Net debt | $1.0B | $1.3B | $3.9B | $3.8B | $3.8B | $10.7B | $10.5B | $9.4B | $8.5B | $5.4B | $5.4B |
Owner’s Scorecard
Will it survive?
- Can it pay its interest? -1.7×Does not cover its interestOperating income ($382M) ÷ interest expense $229M
A full year of operating profit didn't cover the interest bill. This is the zombie zone: the business depends on refinancing, asset sales, or forbearance to service its debt.
- Debt against an operating lossTotal debt $6.0B · operating income ($382M)
There's debt but no operating profit to measure it against, understand that combination before anything else about the company.
- Debt, net of cash $5.4BNet debtCash $590M − debt $6.0B
Netting $590M of cash and short-term investments against $6.0B of debt leaves $5.4B owed. 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.
- Not enough data
The filing data didn't include the inputs for this check.
Is it a good business?
- Below averageNOPAT ($302M) ÷ invested capital $19.6B (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 $256M = operating cash $850M − capex $594M
What an owner could take out without starving the business. That's 2% of revenue. Treating stock comp as the real expense it is (less $88M of SBC) leaves $168M. Honest caveat: capex here blends maintenance and growth, so steady-state Owner Earnings may run higher (see capex vs. depreciation).
- Loss, but cash-generativeNet income ($361M) · cash from operations $850M
The company reported a net loss, so a conversion ratio isn't meaningful. What matters then is whether operations still threw off cash, here, they did.
How is the cash used?
- Returns most of itDividends + buybacks $447M ÷ Owner Earnings $256M
Of $256M Owner Earnings, $447M (175%) went back to shareholders, $409M dividends, $38M buybacks. But the buybacks barely exceed stock issued to employees ($88M SBC), net of dilution, little was truly returned. 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? 0.62×HarvestingCapex $594M ÷ depreciation $962M
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 7 of 10
Lost money in 3 year(s), look at what happened there before trusting the average.
- Return on capital ≥ 15% 1 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 18% (FY2016) → −4% (FY2025)
Margins slipped over the record, competition or costs are biting in.
- Reinvestment, incremental ROIC −5%
Reinvested capital earned a negative return, the business spent money to shrink its own economics.
- Owner earnings growth +3%/yr
Free cash to owners grew about 3% a year over the record.
- Worst year 2023 · −18.4% op. margin
Operations went underwater in 2023, understand why before trusting the good years.
- 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 $8.0B 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$3.3B · 41%
- Dividends$4.5B · 56%
- Buybacks$239M · 3%
It reinvested $3.3B (41%) back into the business and returned $4.7B (59%) to owners, $4.5B in dividends, $239M in buybacks. Total debt rose $4.7B across the span. It returned and reinvested more than it generated, the gap was covered by debt or existing cash.
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
read the proxy →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.
- CEO pay ratio239:1
What the chief earns for every dollar the median employee makes, per the 2026 proxy. A high ratio isn't proof of anything, some businesses are genuinely top-heavy in scarce skill, but a runaway figure is where Buffett starts asking whether the board is doing its job or just keeping the chair company.
- Stock-based compensation$88M
The slice of the business handed to employees in shares this year, 1% of revenue. 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
2 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 · $10.9B
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 MissCurrent ratio ≥ 2× · 1.42×
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 MissDebt ≤ working capital · $6.0B vs $1.7B 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 MissA profit every year (10-yr record) · 3 loss years
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 · −358%
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 $-1.41/share and book value $55.29/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 International Flavors & Fragrances Inc 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 $400M on 257M diluted shares; net debt $5.4B. 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 concentrationMD&A
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.
“In 2025, our 25 largest customers, a majority of which were multinational consumer products companies, collectively accounted for approximately 32% of our sales.”
From the recordRevenue exposed (TTM)$10.8B - Pricing power & competitionRisk Factors
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.
“Our business is highly competitive, and if we are unable to compete effectively our sales and results of operations will suffer.”
From the recordOperating margin7.4% now (TTM), off a 17.7% peak (FY2016) - Supplier & input dependenceRisk Factors
A choke point upstream. A sole or limited supplier can dictate terms, and a single shortage can stop the line.
“For certain materials, we rely on a limited number of suppliers or regions, making us vulnerable to shortages, delays, and price volatility.”
From the recordGross-margin cushion (TTM)36% - Concentrated dependenceMD&A
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.
“Additionally, a significant portion of our sales comes from a relatively small number of large multinational customers.”
From the recordOwner-earnings margin at stake (TTM)4% - 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.
“The amount that we are able to draw down under the Revolving Credit Facility is limited by financial covenants as described in more detail below.”
From the recordBalance sheet (TTM)$5.4B net debt · operating profit doesn't cover interest - Litigation & contingenciesRisk Factors
Claims an owner inherits. Most disclosure is boilerplate; this fires only on an actual matter, a named suit, a settlement, a contingency, a number.
“Our results of operations may be negatively impacted by the outcome of uncertainties related to legal claims, disputes, investigations and litigation, including the ongoing antitrust and competition investigations and related class action lawsuits.”
A judgment, not a number, weigh it against the filing yourself. - Regulation & policyRisk Factors
Rules that can rewrite the economics, tariffs, antitrust, data, export controls.
“Our results of operations may be negatively impacted by legal claims, disputes, investigations and litigation, including the ongoing antitrust and competition investigations and related class action lawsuits.”
A judgment, not a number, weigh it against the filing yourself.
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.
- “Valuation of Certain U.S. and Foreign Legal Entities Associated with the Legal Entity Realignment Project As described in Note 10 to the Consolidated Financial Statements, during the year ended December 31, 2025, we recorded an income tax benefit associated with the legal entity realignment project,…”
- “Our Taste segment consists of the development and production of a range of flavor compounds and natural taste solutions that are ultimately used by our customers in a diverse variety of products, including savory products (soups, sauces, meat, fish, poultry, snacks, etc.), beverages (juice drinks, c…”
- “To determine the amount of the income tax benefit recorded, we first estimated the fair value of the relevant legal entities using the discounted cash flow method or the net asset value method and then analyzed the relevant tax laws and regulations in assessing the tax consequences of the steps with…”
- “For more detailed information about risks related to impairment of goodwill, refer to Item 1A, "Risk Factors" "Any impairment of our tangible or intangible long-lived assets, including goodwill, may adversely impact our profitability." 2025 Financial Performance Overview For a reconciliation between…”
- “Demand for such consumer products depends on consumer preferences that are driven by a variety of factors, such as the increasing use of weight management pharmaceutical products, increasing health and wellness awareness, greater transparency in product labeling, and changes in global, regional or l…”
Classic text analysis over the filing itself, no model wrote a word of this, and every quote is the company's own.
Peers, Chemicals
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 |
|---|---|---|---|---|---|
| REGNRegeneron Pharmaceuticals, Inc. | $14.3B | 97% | 24.9% | 10% | 28% |
| ELEstee Lauder Companies Inc | $14.3B | 74% | -5.5% | -7% | 5% |
| MOSMosaic Co | $12.1B | 16% | 6.8% | 3% | -4% |
| APDAIR Products and Chemicals, Inc. | $12.0B | 31% | -7.3% | -2% | -44% |
| VRTXVertex Pharmaceuticals Inc / MA | $12.0B | 86% | 34.8% | 26% | 27% |
| IFFInternational Flavors & Fragrances Inc | $10.9B | 36% | -3.5% | -2% | 2% |
| BIIBBiogen Inc. | $9.9B | 76% | 28.7% | 11% | 21% |
| ZTSZoetis Inc. | $9.5B | 72% | 37.8% | 26% | 24% |