hormel foods hrl fairly valued buying index™ 3 value rating

Valuentum Retail Equity Research Ratings as of 9-Apr-2022 Data as of 7-Apr-2022

Buying Index™ 6 Value RatingEconomic Castle

Attractive

Investment ConsiderationsDCF ValuationRelative Valuation

Stock Chart (weekly) ValueCreation™ValueRisk™ValueTrend™Cash Flow GenerationFinancial LeverageGrowthTechnical EvaluationRelative StrengthMoney Flow Index (MFI)Upside/Downside Volume (U/D)Near-term Technical Support, 10-week MADCF = Discounted Cash Flow; MFI, U/D = Please see glossary. MA = Moving Average

Business Quality ValueCreation™

ValueRisk™ Very Poor Poor Good ExcellentCompany Vitals Investment HighlightsMarket Cap (USD) $28,879Avg Weekly Vol (30 wks) 9,95230-week Range (USD) 40.48 - 53.19Valuentum Sector Consumer Staples5-week Return 3.8%13-week Return 7.4%30-week Return 25.3%Dividend Yield % 2.0% Firms that generate economic profits with little operating variability score near the top right of the matrix.

Dividends per Share 1.04 Relative Valuation Forward P/E PEG Price / FV

Forward Dividend Payout Ratio 53.1% Coca-Cola 25.4 5.2 137.3%Est. Normal Diluted EPS 2.78 Philip Morris 16.5 3.6 99.5%P/E on Est. Normal Diluted EPS 18.9 Procter & Gamble 26.6 3.6 131.1%Est. Normal EBITDA 2,174 Wal-Mart 22.8 2.0 113.5%Forward EV/EBITDA 19.7 Peer Median 24.1 3.6 122.3%EV/Est. Normal EBITDA 14.5 Hormel Foods 26.9 1.7 109.6%Forward Revenue Growth (5-yr) 4.4% Price / FV = Current Stock Price divided by Estimated Fair Value

Forward EPS Growth (5-yr) 18.7% Financial Summary ProjectedNMF = Not Meaningful; Est. = Estimated; FY = Fiscal Year

Fiscal Year End: Oct-20 Oct-21 Oct-22

Returns Summary 3-year Historical Average Revenue 9,608 11,386 12,320Return on Equity 15.1% Revenue, YoY% 1.2% 18.5% 8.2%Return on Assets 10.1% Operating Income 1,065 1,075 1,354ROIC, with goodwill 12.7% Operating Margin % 11.1% 9.4% 11.0%ROIC, without goodwill 23.0% Net Income 908 909 1,075ROIC = Return on Invested Capital; NMF = Not Meaningful Net Income Margin % 9.5% 8.0% 8.7%Leverage, Coverage, and Liquidity Diluted EPS 1.66 1.66 1.96In Millions of USD Diluted EPS, YoY % -7.5% -0.1% 18.0%Total Debt 3,324 Free Cash Flow (CFO-capex) 760 770 1,007Net Debt 2,689 Free Cash Flow Margin % 7.9% 6.8% 8.2%Total Debt/EBITDA 2.5 In Millions of USD (except for per share items)

Net Debt/EBITDA 2.1 LARGE-CEBITDA/Interest 30.3 NEUTRALCurrent Ratio 2.1Quick Ratio 0.4

Hormel Foods HRL FAIRLY VALUED

High

• Hormel is primarily engaged in the production of avariety of meat and food products and the marketingof those products. Pork, turkey, nuts, beef, andchicken are major raw materials for its products. Keybrands include Skippy peanut butter, Jennie-O TurkeyStore turkey products, the SPAM family of products,Hormel Pepperoni, and Planters snack nuts.

Low

EXCELLENTLOW

STRONGNEUTRAL

$38.00 - $58.00 Estimated Fair Value Sector

MODEST

STRONGNEGATIVE

MEDIUM

1Very High

The information and data contained in this report is not represented or warranted to be timely, complete, accurate, or correct. This report is for informational purposes only and should not be considered a solicitation to buy or sell a security. Before acting on any information in this report, you should consider whether the information is suitable for your particular circumstances and, if necessary, seek professional advice. Assumptions, opinions, and estimates are based on our judgment as of the date of the report and are subject to change without notice. Valuentum is not responsible for any errors or omissions or for results obtained from the use of this report. Redistribution is prohibited without written permission. To license Valuentum research, contact us at [email protected].

Structure of the Food Products IndustryThe food products industry is composed of a number of firms with strong brand names. However, market supply/demand dynamics and intense competition still impact product prices, while fluctuations in commodity costs can make earnings quite volatile. Private-label competition, competitors' promotional spending, and changing consumer preferences often drive demand trends. The group's customers—such as supermarkets, warehouses, and food distributors—continue to consolidate, increasing buying power over constituents and hurting margins. Still, we’re generally neutral on the group.

Fair Value Range

Hormel's pivot towards selling value-added branded products in recent fiscal years has significantly improved its pricing power and ability to navigate inflationary headwinds, which have been quite material of late.

Investment Style Industry $48.00

NEUTRAL

LARGE-CAP CORE Consumer Staples Recession Resistant

FAIRLY VALUED

BULLISH

Medium

• In July 2021, Hormel acquired the Planters snack nutbusiness from Kraft Heinz for roughly $3.35 billion incash or ~$2.8 billion net after expected tax benefits.This deal significantly grew Hormel’s snack offerings.By 2024, the firm is targeting $50-$60 million in run-rate synergies.

• In recent fiscal years, Hormel has placed a greateremphasis on selling branded, value-added productsversus commodity fresh meat products. Inflationaryheadwinds have been material of late, and the pricingstrength selling branded products generates versusselling commodity fresh meat products has helpedHormel better navigate inflationary hurdles.

----- Actual -----

• Please be aware that our cash flow model assumessignificant operating margin expansion, supported bycost control measures, and decent revenue growth,supported by organic sales growth and acquisitions, atHormel over the coming fiscal years.

The week with the highest trading volume out of the last 30 weeks was a week of heavy selling, or distribution (red bar).

NMF = Not Meaningful

DETERIORATING

• Hormel has posted 55+ years of consecutivedividend increases. Management has mademaintaining Hormel's listing as a Dividend Aristocrata priority. The company boasts 'A-rated' credit ratings.Hormel is a highly acquisitive firm, aided by itsfinancial strength.

50.00

Visit us at www.valuentum.com

34.00

39.00

44.00

49.00

54.00

0

10,000,000

20,000,000

30,000,000

40,000,000

50,000,000

60,000,000

70,000,000

80,000,000

90,000,000

Valuentum Retail Equity Research (10=best) Data as of 7-Apr-2022


Attractive

Economic Profit Analysis

ValueCreation™ EXCELLENT Return on Invested Capital (ROIC)

ROIC - WACC Spread, 3-year historical average 13.9%ROIC - WACC Spread, 5-year projected average 23.0%These spreads equal the firm's annual average ROIC (excluding goodwill) less its WACC.

ValueTrend™ NEGATIVE

Weighted Average Cost of Capital (WACC) The graph above shows the firm's ROIC (excluding goodwill) compared with historical averages and its WACC.

ROIC CalculationFiscal Year End: Oct-19 Oct-20 Oct-21

Earnings before InterestOperating Income after Depreciation 1,157 1,065 1,075- Adjusted Taxes (at 18% of EBIT) 208 192 194+ Amortization 12 40 45+ Non-cash Operating Items -221 14 -136- Minority Interest 0 0 0Earnings before Interest 740 927 791

Cost of Equity Invested CapitalRisk Free Rate Assumption Inventories 1,042 1,073 0Fundamental Beta (ERP multiplier) + Receivables 594 744 0Estimated Equity Risk Premium + Current Deferred Income Taxes 0 0 0Cost of Equity Assumption + Other Current Assets 37 30 2,313

+ Property, Plant and Equipment, Net 1,629 1,898 2,109After-tax Cost of Debt + Goodwill, Net (Cost in Excess) 2,482 2,613 4,929Risk Free Rate Assumption + Intangibles 1,034 1,076 1,822Synthetic Credit Spread + Non Current Deferred Income Taxes 0 0 0Cost of Debt Assumption - Accounts Payable 709 800 0Cash Tax Rate Assumption - Other Current Liabilities 395 445 1,407After-tax Cost of Debt Assumption

Invested Capital, with goodwill 5,714 6,189 9,766Cost of Preferred Stock Invested Capital, without goodwill 3,232 3,576 4,837Preferred DividendsValue of Preferred Stock Return on Invested Capital, with goodwill 12.8% 15.6% 9.9%Cost of Preferred Assumption Return on Invested Capital, without goodwill 23.1% 27.2% 18.8%

In Millions of USD

Weighted Average Cost of Capital (WACC)ERP = Equity Risk Premium


9.1%


5.7%

4.3%

0

7.0%18.0%

0NA

9.5%

$48.00 $38.00 - $58.00 LARGE-CAP CORE

Hormel Foods receives a ValueTrend™ rating of NEGATIVE, which is based on thecompany's trailing three-year performance. The firm's ROIC (excluding goodwill) fellto 18.8% last year from its trailing 3-year average of 23%. We expect ROIC (excludinggoodwill) to be in the ballpark of about 42% by the end of our discrete forecast period,with downside risk to about 35% over that time period.

The best measure of a firm's ability to create value for shareholders is expressed bycomparing its return on invested capital (ROIC) with its weighted average cost ofcapital (WACC). The gap or difference between ROIC and WACC is called the firm'seconomic profit spread. Hormel Foods' 3-year historical return on invested capital(without goodwill) is 23%, which is above the estimate of its cost of capital of 9.1%.As such, we assign the firm a ValueCreation™ rating of EXCELLENT. In the chart tothe right, we show the probable path of ROIC in the years ahead based on the estimatedvolatility of key drivers behind the measure. The solid grey line reflects the most likelyoutcome, in our opinion, and represents the scenario that results in our fair valueestimate.

Consumer Staples Recession Resistant Estimated Fair Value Fair Value Range Investment Style Sector Industry

4.3%2.67%

---------- Actual ----------

0.86.5%

Note: Valuentum may provide an adjusted ROIC measure to better reflect the economic substance of a company's operations, as in the case of companies with negative invested capital.

49.5%42.4%

23.1%

27.2%

18.8%

35.3%

WACC, 9.1%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

89.7%

10.3%Equity

Debt

Preferred

Capital Structure



Attractive

Growth Analysis

Revenue Growth MODEST Projected Revenue (in millions of USD) Source: Company Filings, Valuentum Projections

Last Fiscal Year

Revenue3-year Historical

CAGR5-year Projected

CAGRHormel Foods USD 11,386 6.1% 4.4%

Coca-Cola USD 38,655 6.7% 5.7%

Philip Morris USD 31,405 2.0% 3.1%

Procter & Gamble USD 76,118 4.4% 4.7%

Wal-Mart USD 572,754 3.6% 3.2%

Peer Median 4.0% 3.9%

Industry Median 4.1% 3.8%

In the chart above, we show our baseline forecast for revenue as well as potential upside and downside cases.

EBITDA Growth Projected EBITDA (in millions of USD) Source: Company Filings, Valuentum Projections

Last Fiscal Year

EBITDA3-year Historical

CAGR5-year Projected

CAGRHormel Foods USD 1,304 -0.4% 17.8%

Coca-Cola USD 12,606 5.1% 9.3%



Wal-Mart USD 36,600 3.9% 6.2%



In the chart above, we show our baseline forecast for EBITDA as well as potential upside and downside cases.

Net Income Growth Projected Net Income (in millions of USD) Source: Company Filings, Valuentum Projections

Last Fiscal Year Net Income

3-year Historical CAGR

5-year Projected CAGR

Hormel Foods USD 909 -3.5% 18.9%

Coca-Cola USD 9,771 14.9% 5.5%



Wal-Mart USD 13,673 27.0% 14.5%



In the chart above, we show our baseline forecast for net income as well as potential upside and downside cases.


Hormel Foods' revenue expansion has been greater than the median of both its peergroup and industry group during the past three years. We expect the firm's revenueexpansion to outpace the median of its peer group and industry group during the nextfive years. Our growth assessment of each firm is based on the firm's 5-year forwardrevenue CAGR. Hormel Foods' future pace of revenue growth is MODEST, in ouropinion.

Hormel Foods' EBITDA expansion has trailed both that of its peer group and itsindustry group during the past three years. We expect the firm's EBITDA expansion tooutpace its peer group and industry group during the next five years. Hormel Foodssports the highest expected EBITDA growth rate among peers.

Hormel Foods' net income expansion has trailed both that of its peer group and itsindustry group during the past three years. We expect the firm's net income expansionto outpace its peer group and industry group during the next five years. Hormel Foodssports the highest expected net income growth rate among peers.


$48.00 $38.00 - $58.00 LARGE-CAP CORE Consumer Staples Recession Resistant Estimated Fair Value Fair Value Range Investment Style Sector Industry

9,497 9,608

11,386

15,533

14,109

12,686

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

1,322 1,271 1,304

3,020

2,9542,888

0

500

1,000

1,500

2,000

2,500

3,000

3,500

979 908 909

2,318

2,1632,008

0

500

1,000

1,500

2,000

2,500



Attractive

Cash Flow and Financial Leverage AnalysisCash Flow Generation STRONG Financial Leverage MEDIUM

The bars above show the firms operating cash flow, capital expenditures, and free cash flow, respectively. The bars above show the firm's annual debt-to-EBITDA. The red line shows the firm's normalized measure.

Cash Flow from Operations Projected Operating Cash Flow (in millions of USD) Source: Company Filings, Valuentum Projections

Last Fiscal Year CFO


5-year Projected CAGR

Hormel Foods USD 1,002 -6.9% 19.3%

Coca-Cola USD 12,625 19.9% 3.8%



Wal-Mart USD 24,181 -4.5% 14.1%



In the chart above, we show our baseline forecast for CFO as well as potential upside and downside cases.

Free Cash Flow (CFO-capital expenditures) Projected Free Cash Flow (in millions of USD) Source: Company Filings, Valuentum Projections

Last Fiscal Year FCF


5-year Projected CAGR Source: Company Filings, Valuentum Projections

Hormel Foods USD 770 -3.3% 22.0%

Coca-Cola USD 11,258 23.5% 3.5%



Wal-Mart USD 11,075 -14.0% 20.4%



In the chart above, we show our baseline forecast for free cash flow as well as potential upside and downside cases.


Firms that generate a free cash flow margin (free cash flow divided by total revenue)above 5% are usually considered cash cows. Hormel Foods' free cash flow margin hasaveraged about 7.1% during the past 3 years. As such, we think the firm's cash flowgeneration is relatively STRONG. The free cash flow measure shown above is derivedby taking cash flow from operations less capital expenditures and differs fromenterprise free cash flow (FCFF), which we use in deriving our fair value estimate forthe company. For more information on the differences between these two measures,please visit our website at Valuentum.com. At Hormel Foods, cash flow fromoperations increased about 9% from levels registered two years ago, while capitalexpenditures fell about 21% over the same time period.

LARGE-CAP CORE Consumer Staples $48.00


Hormel Foods' cash flow from operations expansion has trailed both that of its peergroup and its industry group during the past three years. We expect the firm's cash flowfrom operations expansion to outpace its peer group and industry group during the nextfive years. Hormel Foods sports the highest expected cash flow from operations growthrate among peers.

Hormel Foods' free cash flow expansion has trailed both that of its peer group and itsindustry group during the past three years. We expect the firm's free cash flowexpansion to outpace its peer group and industry group during the next five years.Hormel Foods sports the highest expected free cash flow growth rate among peers.

Fair Value RangeRecession Resistant $38.00 - $58.00

Firms that exhibit high leverage tend to be more risky than firms with relatively lowdebt loads, all else equal. We measure financial leverage by taking a firm's currenttotal debt load and dividing it by the firm's trailing average 3-year annual EBITDA.Firms that are over 3 for this metric, we rate as having high leverage. Companies thathave less than 1.5 turns of leverage (or a measure below 1.5), we rate as having lowleverage. Hormel Foods' normalized debt-to-EBITDA measure of about 2.56 puts itin the MEDIUM camp.

Estimated Fair Value Sector IndustryInvestment Style

923

1,1281,002

294368

232

629760 770

Oct-19 Oct-20 Oct-21

Cash from Operations Capital Expenditures Free Cash Flow Hormel Foods -normalized

leverage, 2.56

0

0.5

1

1.5

2

2.5

3

3.5

10/31/2019 10/31/2020 10/31/2021

Hormel Foods- annual leverage Hormel Foods - normalized leverageMedium Threshold HighThreshold

9231,128

1,002

2,847

2,423

1,999

0

500

1,000

1,500

2,000

2,500

3,000

629760 770

2,392

2,081

1,769

0

500

1,000

1,500

2,000

2,500

3,000



Attractive

Valuation Analysis

Valuation Assumptions Valuation BreakdownIn Millions of USD (except for per share items)

Revenue CAGR %Avg. EBIT Margin %Avg. Cash Tax Rate %Earnings Before Interest CAGR %Earnings Per Share CAGR %Free Cash Flow to the Firm CAGR %Earnings before interest = Net operating profits less adjusted taxes

Phase II --> III FCFF CAGR % 3.1% (II) 3% (III)Cost of Equity %After-tax Cost of Debt %Discount Rate (WACC) %Synthetic credit spread = 2.667%

Phase I Present ValuePhase II Present ValuePhase III Present ValueTotal Firm Value

Net Balance Sheet Impact

Total Equity ValueDiluted Shares OutstandingFair Value per Share

DCF Valuation Summary Enterprise Free Cash FlowFiscal Year End: 10/31/2019 10/31/2020 10/31/2021

740 927 791153 166 184294 368 232

3 40 -572 - Acquisitions 0 271 3,396

595 414 -2,082In Millions of USD

Source: Company Filings, Valuentum Projections

Company NameValuentum Buying

Index™Forward Price-to-

Earnings

Price/Earnings-to-Growth (PEG), 5-

yearEV/Est. Normal

EBITDA

5-year Forward Earnings per Share CAGR

3-year Hist Avg ROIC, without

goodwillDividend Yield

%

Stock Price / Fair Value Estimate

Hormel Foods 6 26.9 1.7 14.5 18.7% 23.0% 2.0% 109.6%

Coca-Cola 4 25.4 5.2 16.5 5.4% 44.2% 2.8% 137.3%

Philip Morris 3 16.5 3.6 10.9 4.7% 116.9% 5.0% 99.5%

Procter & Gamble 4 26.6 3.6 16.8 8.0% 44.5% 2.2% 131.1%

Wal-Mart 7 22.8 2.0 10.8 15.7% 25.7% 1.4% 113.5%

Peer Median 4.0 24.1 3.6 13.7 6.7% 44.3% 2.5% 122.3%

Industry Median 6.0 21.3 2.1 11.2 10.5% 24.2% 2.3% 105.3%

Fair Value Range


18.7%

---------- Actual ----------

23.1

14.5

18.7

16.8

18.9

P/E on Est. Normal Diluted EPS

12.8

Long-term Projections

9.5%

15.2


5,60313,468

View back of report for a full list of industry constituents covered by Valuentum. VBI: Valuentum's ranking for the attractiveness of this investment at the date of the report.

IndustryInvestment Style Sector

- Capital Expenditures

Estimated Fair Value

9.1%

In the chart below, we show the build up to our estimate of total enterprise value forHormel Foods and the break down to the firm's total equity value, which we estimateto be about 26.13USD billion. The present value of the enterprise free cash flowsgenerated during each phase of our model and the net balance sheet impact isdisplayed. We divide total equity value by diluted shares outstanding to arrive at our$48 per share fair value estimate.

28,821

18.0

12.2

19.0

12.3

5-year Projections

Forward EV/EBITDA

- Change in Working Capital

Enterprise Free Cash Flow (FCFF)

Our future forecasts for key valuation drivers result in a future free enterprise cashflow stream. Above, we show how we calculate enterprise free cash flow and thehistorical performance of the metric for Hormel Foods. Over the next five years, weexpect the firm's enterprise free cash flow to expand at about a -200% compoundannual growth rate. During years 6 through 20, we expect the measure to grow at a3.1% rate. Beyond year 20 (in perpetuity), we grow the firm's free cash flow atinflation (3%).

4.4%14.4%

-2,689

Earnings before Interest

26,132

We think Hormel Foods is worth $48 per share with a fair value range of $38.00 -$58.00. The margin of safety around our fair value estimate is driven by the firm'sLOW ValueRisk™ rating, which is derived from an evaluation of the historicalvolatility of key valuation drivers and a future assessment of them. Our near-termoperating forecasts, including revenue and earnings, do not differ much from consensusestimates or management guidance. Our model reflects a compound annual revenuegrowth rate of 4.4% during the next five years, a pace that is lower than the firm's 3-year historical compound annual growth rate of 6.1%. Our model reflects a 5-yearprojected average operating margin of 14.4%, which is above Hormel Foods's trailing 3-year average. Beyond year 5, we assume free cash flow will grow at an annual rate of3.1% for the next 15 years and 3% in perpetuity. For Hormel Foods, we use a 9.1%weighted average cost of capital to discount future free cash flows.

In Millions of USD

Results

18.0%

19.7

+ Depreciation

5.7%

9,750

$38.00 - $58.00 LARGE-CAP CORE Consumer Staples

548.8

-200.3%

$48.00

20.7

Company Metrics versus Peer and Industry Medians

22.7

23.8%

Recession Resistant $48.00

5,603

13,468

9,750

2,689

26,132

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

Yr 1-5 Yr 6-20 Perpetuity Net Balance SheetImpact

Equity Value



Attractive

Margin of Safety Analysis

Range of Potential Outcomes ValueRisk™ LOW

Revenue Volatility 8.1%Gross Margin Volatility 3.7%Earnings (EBI) Volatility 13.4%Cash Flow (FCFF) Volatility Greater than 50%Fair Value Range 20.0%The Fair Value Range sets the premium or discount on our estimate of the firm's fair value.

Upside and Downside ProbabilitiesProbability (fair value < $0) Less than 0.1%Probability (fair value > 2x current share price) 0.00%

Future Path of Fair Value

The graph above shows the expected future fair value of the firm's shares relative to its current stock price.

Our discounted cash flow process values each firm on the basis of the present value ofall future free cash flows. Although we estimate the firm's fair value at about $48 pershare, every company has a range of probable fair values that's created by theuncertainty of key valuation drivers (like future revenue or earnings, for example). After all, if the future were known with certainty, we wouldn't see much volatility in themarkets as stocks would trade precisely at their known fair values. Our ValueRisk™rating sets the margin of safety or the fair value range we assign to each stock. In thegraph above, we show this probable range of fair values for Hormel Foods. We thinkthe firm is attractive below $38 per share (the green line), but quite expensive above$58 per share (the red line). The prices that fall along the yellow line, which includesour fair value estimate, represent a reasonable valuation for the firm, in our opinion.

We estimate Hormel Foods' fair value at this point in time to be about $48 per share. Astime passes, however, companies generate cash flow and pay out cash to shareholdersin the form of dividends. The chart to the right compares the firm's current share pricewith the path of Hormel Foods' expected equity value per share over the next threeyears, assuming our long-term projections prove accurate. The range between theresulting downside fair value and upside fair value in Year 3 represents our bestestimate of the value of the firm's shares three years hence. This range of potentialoutcomes is also subject to change over time, should our views on the firm's future cashflow potential change. The expected fair value of $60 per share in Year 3 represents ourexisting fair value per share of $48 increased at an annual rate of the firm's cost ofequity less its dividend yield. The upside and downside ranges are derived in the sameway, but from the upper and lower bounds of our fair value estimate range.

$38.00 - $58.00Sector Fair Value Range Investment Style

LARGE-CAP CORE Estimated Fair Value

$48.00



We strive to answer a few questions that investors often ask: 1) What are the chancesof a total loss of investment in this company? and 2) What is the chance that thecompany is really worth twice what I paid for it? The probability (fair value < 0)strives to answer the first question. It indicates the chance that the firm mayencounter insolvency based on the characteristics of its cash flow stream, capitalstructure, and risk profile. The probability (fair value > 2x current share price) strivesto answer the second question. It is our best estimate of whether investors areparticipating in a half-off sale by buying the company's shares at current prices.

IndustryRecession Resistant

Hormel Foods receives a ValueRisk™ rating of LOW based of the historicalvolatility of key drivers of economic value creation. The fair value range sets themargin of safety around our fair value estimate of the firm's shares.

Consumer Staples

$38

$48

$58

0 20 40 60 80 100

$72

$60Current Share

Price, $53

$47

$0

$10

$20

$30

$40

$50

$60

$70

$80

Current Share Price Yr 1 Fair Value Yr 2 Fair Value Yr 3 Fair Value



Attractive

Technical Analysis

Technical Evaluation BULLISH Money Flow Index (MFI) NEUTRAL

30-week Price and Volume Chart (weekly)Relative Price Strength STRONG

5-week Company Performance 3.8%5-week Market Benchmark Performance -8.2%5-week Relative Performance vs. Market Benchmark 12.0%13-week Company Performance 7.4%13-week Market Benchmark Performance -14.4%13-week Relative Performance vs. Market Benchmark 21.8%30-week Company Performance 25.3%30-week Market Benchmark Performance -11.7%30-week Relative Performance vs. Market Benchmark 37.1%

Upside/Downside Volume DETERIORATING Timeliness Matrix™ Equity Valuation

Relative Strength

Firms that are undervalued and currently showing near-term pricing strength score near the top right of the matrix.

Neutral

Estimated Fair Value Fair Value Range

Strong

Overvalued

Industry $48.00

UndervaluedFairly Valued

Investment Style

The Money Flow Index (MFI) is an oscillator that uses price and volume to measurebuying and selling pressure. Chartists often look for overbought (above 80) andoversold (below 20) levels to warn of unsustainable near-term price extremes. HormelFoods' MFI of 62 is neutral, suggesting the firm's stock is neither overbought noroversold at this time. However, a score over 50 tends to favor bulls. The MFI can alsobe used to gauge the strength or weakness of a firm's price trend. In Hormel Foods'case, its stock has generally increased during the past several weeks, but money flowor momentum has deteriorated, a bearish divergence and unhealthy trend. We'd keepa close watch for deteriorating technicals.

The firm's near-term moving average (5-week, grey line) and medium-term movingaverage (13-week, red line) are shown in the chart above. Typically, when a shorter-term moving average crosses a medium- or longer-term moving average from below, itrepresents a bullish signal. If the short-term moving average crosses from above, tradersoften view this as bearish. Hormel Foods' 5-week moving average resides above its 13-week measure, indicating a BULLISH trend. We'd grow wary of the firm's technicalsshould its 5-week moving average drop below its 13-week moving average, as thefirm's 30-week uptrend could be threatened if this occurs.


Weak


The level and trend of the Upside/Downside (U/D) volume ratio reveals whetherinstitutional participation has been bullish or bearish as of late. Although HormelFoods's U/D volume ratio of 1.2 is greater than 1, it resides below its trailing average,indicating bullish but DETERIORATING institutional interest during the past severalweeks.

SectorConsumer Staples

In the chart above, we pinpoint the heaviest accumulation or distribution week of thefirm, determined by the week with the highest trading volume during the past 30 weeks.A heavy accumulation (buying) or distribution (selling) week often determines thefuture near-term direction of the firm's share price, as money managers continue tomove in or out of the stock in the days and weeks ahead driving the stock up or down,respectively. For Hormel Foods, the week with the highest trading volume out of thelast 30 weeks was a week of heavy buying, or accumulation (green bar). Such marketactivity could indicate a reversal of a downtrend or further confirmation of the firm'suptrend.

A firm's relative price strength can be assessed over any number of time horizons. Weshow the firm's performance over the past 5 weeks, 13 weeks, and 30 weeks below.In arriving at our relative strength rating for each company, we assess the past 13weeks, which includes the market's reaction to the firm's most recently reportedquarter, where applicable, and other more recent economic events. During the past 13weeks, Hormel Foods' shares returned 7.4%, while the market benchmark returned -14.4%. We think Hormel Foods' 13-week relative price performance is STRONG.

Recession Resistant $38.00 - $58.00 LARGE-CAP CORE

1Companies that are undervalued and showing near-term relative price strength couldrepresent timely buys, as the stock may be attractive to both value and momentuminvestors. A cross section of the firm's equity valuation and its relative share pricestrength is shown in the matrix above. We tend to prefer undervalued stocks that have strong pricing momentum, also called Valuentum stocks.

34

39

44

49

54

010,000,00020,000,00030,000,00040,000,00050,000,00060,000,00070,000,00080,000,00090,000,000

5-week Moving Average

13-week Moving Average

Stock Price

39414345474951535557

Overbought Line

Oversold Line

7262

0102030405060708090

2.8

1.2Average, 1.6

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

- 10-week Moving Average



Attractive

Pro Forma Income Statement -------------------- Historical --------------------

In Millions of USD (except for per share items)Oct-19 Oct-21

Total Revenue 9,497 11,386

Cost of Goods Sold 7,613 9,458

Selling, General and Administrative Expenses 727 853

Other Operating Expenses 0 0

Operating Income 1,157 1,075

Unusual items 0 0

Operating Income, including unusual items 1,157 1,075

Interest Expense (18) (43)

Other Non-operating Income 71 94

Pre-tax Income 1,210 1,126

Income Taxes 231 217

Income after tax 979 909

Minority Interest and Equity Income 0 0

Net Income, excluding extra items 979 909

Income Available to Common, excluding extra items 979 909

Diluted Earnings per Share, excluding extra items 1.80 1.66

Diluted Weighted Shares Outstanding 545.2 547.6

Source: Company Filings, Xignite, Valuentum Projections

Oct-20

7,782

761

0


1,167

206

Fair Value Range Investment Style

9,608

0

907

10,058

1,065

Consumer Staples Recession Resistant

1,114

1,075

0 0 0

1,167

70

Oct-22

0

548.8

1,354

12,677

0

10,284

927

0

1,075

1,423

256

1,311

0

1,354

236

1,167

2.12

908 1,075

1.961.66

908

546.6


Estimated Fair ValueLARGE-CAP CORE

Sector Industry $48.00 $38.00 - $58.00

908

550.1

1,466

0

0

(43)

Oct-23

1,065

12,320

(21)

1,466

(43)

---------- Projected ----------

Note: Pro forma data in discounted cash-flow valuation may reflect significant adjustments from GAAP accounting data, including cash (not effective) tax rates and other analytical adjustments on a backward-looking and forward-looking basis. No individual data, by itself, found in this report should be used to make any investment decision.



Attractive

Pro Forma Balance Sheet -------------------- Historical --------------------


AssetsTotal Cash (including marketable securities) 688 635Inventory 1,042 0Accounts Receivable 594 0Other Current Assets 37 2,313Total Current Assets 2,361 2,948

Gross Fixed Assets 3,355 4,136(Accumulated Depreciation) (1,726) (2,027)Net Property, Plant, and Equipment 1,629 2,109

Goodwill, Net 2,482 4,929Intangibles, Net 1,034 1,822Other Long-term Assets 603 888Total Assets 8,109 12,696

LiabilitiesAccounts Payable 709 0Other Current Liabilities 395 1,407Current Portion of Long-term Debt 0 9Total Current Liabilities 1,104 1,416

Long-term Debt 250 3,315Other Long-term Liabilities 834 992Total Liabilities 2,188 5,723

Preferred Stock 0 0

Shareholders' EquityCommon Stock and Additional Paid in Capital 193 368Retained Earnings 6,128 6,882Other Equity (400) (277)Total Shareholders' Equity 5,921 6,973

Total Liabilities and Shareholders' Equity 8,109 12,696

Sector

1,137 1,677

30 2,313 2,313

$38.00 - $58.00Industry

LARGE-CAP CORE

13,427

1,504 1,527 1,643

9,908

144

259

4,446

Consumer Staples

2071,073

Recession Resistant

Oct-20

Estimated Fair Value Fair Value Range $48.00

Investment Style


1,732

14,215

101

9 9445 1,447 1,490

Oct-22 Oct-23

800 71

62 129

4,3263,613

298 433 4996,523 7,387 7,941

0

3,482 5,834 5,950

0 0

(395) (227) (176)6,426 7,593 8,265

3,579

742 888 888

2,613 4,929 4,9291,076 1,777 1,732

9,908 14,215

1,045 3,315 3,315933 992 992


---------- Projected ----------

2,220 2,340

744

(2,226) (2,431)1,898

4,771(1,869)3,767


13,427




Attractive

Pro Forma Cash Flow Statement -------------------- Historical --------------------


Cash from OperationsNet Income 979 909Depreciation and Amortization 165 229Deferred Income Taxes 0 0Operating Gains Or Losses (221) (136)Changes in Working Capital 0 0

Cash Flow from Operations 923 1,002

Cash from InvestingPurchase of Property, Plant, Equipment (294) (232)Other Investing Cash Flows 514 (3,394)Cash Flow from Investing 220 (3,626)

Cash from FinancingIssuance (Retirement) of Stock (114) 0Issuance (Retirement) of Debt (375) 0Dividends Paid (437) (523)Other Financing Cash Flows 0 4,245Cash Flow from Financing (926) 3,722

Foreign Exchange (3) 3

Net Change in Cash 214 1,101

Investment Style Sector

Oct-20 Oct-22 Oct-23

Industry $48.00 $38.00 - $58.00 LARGE-CAP CORE Consumer Staples Recession Resistant

Hormel Foods HRL FAIRLY VALUED Estimated Fair Value Fair Value Range

---------- Projected ----------

(288) 0 0

(2) 0 0

65 66

1,317 1,412

(368) (310)

908 1,075 1,167206

(656) (310) (325)

0

0 0(487) (571) (612)984

244 250

70

(325)

1,128

0 0 014 50 52

0 (53) (56)


(547)(505)565

1,041


502 541

4 0




Attractive

Recession ResistantRecession Resistant FAIRLY VALUED

Company Name TickerMarket Cap (USD-

mil) DCF Valuation ValueCreation™ ValueRisk™ ValueTrend™ Technicals Relative Strength

Altria Group MO 98,495 FAIRLY VALUED EXCELLENT LOW NEGATIVE BULLISH STRONG

Anheuser-Busch InBev BUD 119,408 UNDERVALUED EXCELLENT MEDIUM POSITIVE BEARISH NEUTRAL

Archer-Daniels-Midland ADM 52,434 FAIRLY VALUED EXCELLENT MEDIUM POSITIVE BULLISH STRONG

Campbell Soup CPB 13,643 FAIRLY VALUED EXCELLENT MEDIUM NEGATIVE VERY BULLISH STRONG

Casey's General CASY 7,661 FAIRLY VALUED GOOD MEDIUM POSITIVE BULLISH STRONG

Church & Dwight CHD 25,614 OVERVALUED EXCELLENT LOW NEGATIVE BULLISH STRONG

Clorox CLX 18,331 FAIRLY VALUED EXCELLENT LOW POSITIVE BEARISH WEAK

Coca-Cola KO 274,049 OVERVALUED EXCELLENT MEDIUM POSITIVE BULLISH STRONG

Colgate-Palmolive CL 67,427 FAIRLY VALUED EXCELLENT LOW POSITIVE VERY BULLISH STRONG

Costco COST 266,156 FAIRLY VALUED EXCELLENT LOW POSITIVE BULLISH STRONG

Fresh Del Monte FDP 1,235 UNDERVALUED POOR LOW NEGATIVE BEARISH STRONG

General Mills GIS 42,898 FAIRLY VALUED EXCELLENT LOW POSITIVE VERY BULLISH STRONG

Hormel Foods HRL 28,879 FAIRLY VALUED EXCELLENT LOW NEGATIVE BULLISH STRONG

Kellogg K 22,858 FAIRLY VALUED EXCELLENT LOW NEGATIVE BULLISH STRONG

Keurig Dr Pepper KDP 53,936 FAIRLY VALUED GOOD LOW NEGATIVE BEARISH STRONG

Kimberly-Clark KMB 42,696 FAIRLY VALUED EXCELLENT LOW NEGATIVE BEARISH STRONG

Kraft Heinz KHC 49,489 FAIRLY VALUED GOOD MEDIUM POSITIVE BULLISH STRONG

Kroger KR 44,667 OVERVALUED EXCELLENT MEDIUM POSITIVE BULLISH STRONG

Lancaster Colony LANC 4,253 FAIRLY VALUED EXCELLENT MEDIUM NEGATIVE BEARISH STRONG

McCormick MKC 27,805 FAIRLY VALUED EXCELLENT MEDIUM NEGATIVE BULLISH STRONG

Molson Coors TAP 10,961 FAIRLY VALUED GOOD LOW NEGATIVE VERY BEARISH STRONG

Mondelez Intl MDLZ 87,973 FAIRLY VALUED GOOD LOW POSITIVE BEARISH STRONG

PepsiCo PEP 239,471 FAIRLY VALUED EXCELLENT LOW POSITIVE BULLISH STRONG

Philip Morris PM 155,183 FAIRLY VALUED EXCELLENT LOW POSITIVE BEARISH STRONG

Procter & Gamble PG 412,554 OVERVALUED EXCELLENT LOW POSITIVE VERY BULLISH STRONG

Smucker SJM 15,425 FAIRLY VALUED EXCELLENT LOW POSITIVE VERY BULLISH STRONG

Sysco SYY 42,661 FAIRLY VALUED EXCELLENT MEDIUM POSITIVE BULLISH STRONG

Target TGT 109,554 FAIRLY VALUED EXCELLENT LOW NEGATIVE BULLISH STRONG

Tyson Foods TSN 33,204 FAIRLY VALUED EXCELLENT MEDIUM POSITIVE VERY BULLISH STRONG

Wal-Mart WMT 435,981 FAIRLY VALUED EXCELLENT LOW NEGATIVE BULLISH STRONG

Estimated Fair Value Fair Value Range Investment Style Sector Industry


$48.00 $38.00 - $58.00 LARGE-CAP CORE Consumer Staples Recession Resistant

Relative Valuation

ATTRACTIVE

ATTRACTIVE

NEUTRAL

NEUTRAL

ATTRACTIVE

UNATTRACTIVE

NEUTRAL

UNATTRACTIVE

ATTRACTIVE

UNATTRACTIVE

SMALL-CAP VALUE

LARGE-CAP CORE

LARGE-CAP VALUE

LARGE-CAP CORE

LARGE-CAP CORE

MID-CAP VALUE

ATTRACTIVE

NEUTRAL

ATTRACTIVE

NEUTRAL

ATTRACTIVE

NEUTRAL

The above bar chart reveals the price/fair value of the company, its peers, and the industry as a whole.

We think the Recession Resistant industry is fairly valued at this time. The industry'smarket cap is trading between 80% and 120% of our estimate of its fair value based onour DCF process. Although we use a firm-specific ValueRisk™ measure to determinewhether a firm is undervalued or overvalued based on our DCF process, we consider anindustry to be undervalued if it is trading below 80% of our estimate of its fair valueand overvalued if it is trading at over 120% of our estimate of its fair value. We thinkthese fair value ranges are appropriate given the diversification benefits of holding abasket of stocks. Although there may be individual opportunities within the RecessionResistant industry, we don't find the industry as a whole attractive based solely onvaluation.

Shaded blue denotes that the firm has earned the highest rating for that respective category.Investment Style

LARGE-CAP CORE

LARGE-CAP VALUE

LARGE-CAP CORE

LARGE-CAP VALUE

MID-CAP GROWTH

LARGE-CAP CORE

MEGA-CAP CORE

LARGE-CAP CORE

LARGE-CAP VALUE

MEGA-CAP CORE

LARGE-CAP CORE

MEGA-CAP CORE

ATTRACTIVE

LARGE-CAP CORE


LARGE-CAP CORE

LARGE-CAP CORE

LARGE-CAP CORE

LARGE-CAP VALUE

NEUTRAL

NEUTRAL

LARGE-CAP VALUE

MEGA-CAP CORE

LARGE-CAP CORE

LARGE-CAP GROWTH

LARGE-CAP CORE

NEUTRAL

NEUTRAL

NEUTRAL

NEUTRAL

NEUTRAL

NEUTRAL

NEUTRAL

UNATTRACTIVE

ATTRACTIVE

NEUTRAL

ATTRACTIVE

LARGE-CAP CORE

MEGA-CAP CORE

109.6%

122.3%

105.3%

95%

100%

105%

110%

115%

120%

125%

Hormel Foods Peer Median Recession Resistant

Valuentum's Full Page Stock Report


BA

G

I

N

C

J

D

M

H

E

L

K

A DCF ValuationShows whether the firm is undervalued, fairly valued, or overvalued based on our DCF process and by how much.

B Valuentum Buying Index (VBI)Provides insight into the timeliness of an investment opportunity. We rank firms from 1 to 10 based on rigorous fiancial, valuation, and technical analysis. A 10 represents one of our top picks.

C Valuentum Value Rating (VVR) Indicates whether we think a firm is undervalued, fairly valued, or overvalued on the basis of our DCF process.

D Investment ConsiderationsEvaluates firms on 12 different measures, from the firm's growth and cash flow generation to the stock's money flow index and upside/downside volume. We reveal technical support and resistance levels.

E 30-week Price and Volume ActionDisplays the last accumulation or distribution week of the stock and historical price and volume action.

G Company VitalsShows sector,industry and other relevant company information.

H Business QualitySummary of the firm's ability to create value for shareholders compared wth the underlying risk of its operations.

I Normalized EPS and EBITDAEstimation of the firm's normalized earnings measures and the corresponding valuation mutliples.

J Investment HighlightsOur opinion of the company, including analysis of its financial and technical strengths and weaknesses.

K Relative ValuationComparison of the firm's PE, PEG, and Price/FV ratios versus peers.

L Returns Summary3-year averages of the firm's key return measures, including return on invested capital, with and without goodwill.

M Leverage, Coverage, and LiquidityA snapshot of the company's financial health.

N Financial SummaryA summary of the proforma financial statements found in the extended report.

VBI Score Action10 Top Pick9 We'd Consider Buying

6 to 8 Constructive (add/trim)3 to 6 Less Exciting (add/trim)1 to 2 We'd Consider Selling

UNDERVALUED

FAIRLY VALUED

OVERVALUED

• Revenue Volatility • Margin Volatility • Earnings Volatility • Cash Flow VolatilityThe information and data contained in this report is not represented or warranted to be timely, complete, accurate, or correct. This report is for informational purposes only and should not be considered a solicitation to buy or sell a security. Before acting on any information in this report, you should consider whether the information is suitable for your particular circumstances and, if necessary, seek professional advice. Assumptions, opinions, and estimates are based on our judgment as of the date of the report and are subject to change without notice. Valuentum is not responsible for any errors or omissions or for results obtained from the use of this report. Redistribution is prohibited without written permission. To license Valuentum research, contact us at [email protected].

Historical firm-specific financial data generates our ValueCreation™, ValueRisk™, and ValueTrend™ ratings. The data provides the basis for our financial forecasts. The volatility of key valuation drivers are estimated and a margin of safety is determined.

Full annual forecasts of income statement, balance sheet, and cash flow statement items. Firm-specific cost of equity, cost of debt, weighted average cost of capital, and long-term growth and profitability measures estimated.

The firm's stock price is compared to the suggested margin of safety. If a firm's stock price falls below the lower bound of our estimated fair value range, it receives Valuentum's highest Value Rating.

Our analysis doesn’t stop there. We also offer a technicalevaluation of the stock as well as other momentumindicators. We not only want to reveal to readers whichfirms may be undervalued, in our view, but we also wantto provide readers with information to help them assessentry and exit points. Most research publishers focus onarriving at a target price or fair value estimate, but mayfall short of providing a technical assessment to bolsterbuy and sell disciplines. We strive to go the distance andprovide readers with answers--not half the story.

An explanation of our approach would not be complete ifwe didn’t describe our ideal stock idea. We’re lookingfor companies that are undervalued--both on a DCF basisand versus peers--have strong growth potential, have asolid track record of creating economic profits forshareholders with reasonable risk, are strong cash flowgenerators, have manageable financial leverage, and arecurrently showing bullish technical and momentumindicators. For dividend growth ideas, we look forcompanies that have both the capacity and willingness tokeep raising the dividend.

Can such stock ideas exist? Subscribe to Valuentum toreceive our best investment ideas and analysis onhundreds of stocks, dividends, ETFs and more.

@Valuentum, we strive to stand out from the crowd. Mostinvestment research publishers fall into a few camps,whether it be value, growth, income, momentum, chartistor some variant of the aforementioned. We think each inits own right holds merit, but we think the combination ofthese approaches can be even more powerful. After all,stock price movements aren’t just driven by investors ofthe value or growth variety, but by all market participants.Therefore, we look at stocks from a variety of investmentperspectives in order to better understand and identifyideas. We want to provide relevant information.

The core of our process is grounded in rigorous discountedcash flow analysis and incorporates the concept of amargin of safety. We offer a fair value estimate for eachcompany and provide a relative valuation assessment inthe context of a company’s industry and closest peers. Across section of our ValueCreation™ and ValueRisk™ratings provides a financial assessment of a company’sbusiness quality, while our ValueTrend™ rating offersinsight into the trajectory of a firm’s economic profitcreation. The Economic Castle rating measures themagnitude of future economic value generation, and theDividend Cushion ratio assesses the financial capacity of acompany to keep raising its dividend.

A complete three-stage free cash flow to the firm valuation model generates an estimate of the firm's equity value per share based on estimated future free cash flows.

About Valuentum

Financial Forecasts

Financial Statement Analysis

Discounted Cash Flow Valuation

ModelValueRisk™

Rating

Valuentum Value Rating (VVR)

VBI Score Action10 Top Pick9 We'd Consider Buying

6 to 8 Constructive (add/trim)3 to 6 Less Exciting (add/trim)1 to 2 We'd Consider Selling

Methodology for Picking Stocks - Valuentum Buying Index™ (VBI)

The information contained in this report is not represented or warranted to be accurate, correct, complete, or timely. This report is for informational purposes only and should not be considered a solicitation to buy or sell a security. Before acting on any information in this material, you should consider whether it is suitable for your particular circumstances and, if necessary, seek professional advice. Assumptions, opinions, and estimates are based on our judgment as of the date of the report and are subject to change without notice. Valuentum is not responsible for any errors or omissions or for results obtained from the use of this report. Redistribution is prohibited without written permission. To license Valuentum research, contact us at [email protected].

'bullish' technicals. The firm would need aValueCreation™ rating of 'good' or 'excellent', exhibit'high' or 'aggressive' growth prospects, and generate atleast a 'medium' or 'neutral' assessment for cash flowgeneration, financial leverage, and relative price strength.

This is a tall order for any company. Stocks that don'tmake the cut for a 10 are ranked accordingly, with theleast attractive stocks, in our opinion, garnering a ratingof 1 ("We'd sell"). Most of our coverage universeregisters ratings between 3 and 7, but at any given timethere could be large number of companies garneringeither very high or very low scores, especially at marketlows or tops, respectively.

The Best Ideas Newsletter portfolio puts the VBI intopractice.

@ Valuentum, we like to look at companies from anumber of different perspectives. The Valuentum BuyingIndex (VBI) combines rigorous financial and valuationanalysis with an evaluation of a stock's technicals to derivea rating between 1 and 10 for each company. The VBIplaces considerable emphasis on a company's discountedcash-flow (DCF) valuation, its relative valuation versuspeers (both forward PE and PEG ratios), and its technicalsin order to help readers assess entry and exit points on themost interesting ideas.

Let's follow the red line on the flow chart below to seehow a company can score a 10, the best mark on the index(a "Top Pick"). First, the company would need to be'undervalued' on a DCF basis and 'attractive' on a relativevalue basis. The stock would also have to be exhibiting

DCF FairlyValued

DCF Undervalued

Relative ValueUnattractive/Neutral

Relative Value Attractive

Relative ValueUnattractive/Neutral


Technicals Bearish: 1

Technicals Neutral: 2

TechnicalsBullish: 4

Technicals Bullish: 7

TechnicalsBearish: 6

Technicals >= BullishValueCreation(TM) >= GoodGrowth >= HighCash Flow Generation >= MediumFinancial Leverage <= MediumRelative Strength >= Neutral

Final Score: 10



TechnicalsBearish: 3

Relative Value Unattractive/Neutral











Initial Index Score

DCF Overvalued

Glossary

Technical Evaluation. We evaluate a firm's near-term and medium-term movingaverages and money flow index (MFI) to assign each firm a rating along thefollowing scale: VERY BULLISH, BULLISH, NEUTRAL, BEARISH, and VERYBEARISH.

DCF Valuation. We opine on the firm's valuation based on our DCF process. Firmsthat are trading with an appropriate discount to our fair value estimate receive anUNDERVALUED rating. Firms that are trading within our fair value range receive aFAIRLY VALUED rating, while firms that are trading above the upper bound of ourfair value range receive an OVERVALUED rating.

Investment Style. Valuentum uses its own proprietary stock-classification system.Nano-cap: Less than $50 million; Micro-cap: Between $50 million and $200 million;Small-cap: Between $200 million and $2 billion; Mid-cap: Between $2 billion and$10 billion; Large-cap: Between $10 billion and $200 billion; Mega-cap: Over $200billion. Blend: Firm's that we think are undervalued and exhibit high growthprospects (growth in excess of three times the rate of assumed inflation). Value:Firm's that we believe are undervalued, but do not exhibit high growth prospects.Growth: Firms that are not undervalued, in our opinion, but exhibit high growthprospects. Core: Firms that are neither undervalued nor exhibit high growthprospects.

Company Vitals. In this section, we list key financial information and the sector andindustry that Valuentum assigns to the stock. The P/E-Growth (5-yr), or PEG ratio,divides the current share price by last year's earnings (EPS) and then divides thatquotient by our estimate of the firm's 5-year EPS growth rate. The estimatednormalized diluted EPS and estimated normalized EBITDA represent the five-yearforward average of these measures used in our discounted cash flow model. The P/Eon estimated normalized EPS divides the current share price by estimated normalizeddiluted EPS. The EV/estimated normalized EBITDA considers the current enterprisevalue of the company and divides it by estimated normalized EBITDA. EV is definedas the firm's market capitalization plus total debt, minority interest, preferred stockless cash and cash equivalents.

Upside/Downside Volume. Heavy volume on up days and lower volume on down days suggests that institutions are heavily participating in a stock's upward advance. We use the trailing 14-week average of upside and downside volume to calculate an informative ratio. We rank each firm's U/D volume ratio along the following scale: BULLISH, IMPROVING, DETERIORATING, and BEARISH.

The information contained in this report is not represented or warranted to be accurate, correct, complete, or timely. This report is for informational purposes only and should not be considered a solicitation to buy or sell a security. Before acting on any information in this material, you should consider whether it is suitable for your particular circumstances and, if necessary, seek professional advice. Assumptions, opinions, and estimates are based on our judgment as of the date of the report and are subject to change without notice. Valuentum is not responsible for any errors or omissions or for results obtained from the use of this report. Redistribution is prohibited without written permission. To license Valuentum research, contact us at [email protected].

Estimated Fair Value. This measure is our opinion of the fair equity value per share ofthe company. If our forecasts prove accurate, which may not always be the case, wemay expect a firm's stock price to converge to this value within the next 3 years.

Fair Value Range. The fair value range represents an upper bound and lower bound,between which we would consider the firm to be fairly valued. The range considers ourestimate of the firm's fair value and the margin of safety suggested by the volatility ofkey valuation drivers, including revenue, gross margin, earnings before interest, andenterprise free cash flow (the determinants behind our ValueRisk™ rating).

ValueCreation™. This is a proprietary Valuentum measure. ValueCreation™indicates the firm's historical track record in creating economic value for shareholders,taking the average difference between ROIC (without goodwill) and the firm'sestimated WACC during the past three years. The firm's performance is measured alongthe scale of EXCELLENT, GOOD, POOR, and VERY POOR. Those firms withEXCELLENT ratings have a demonstrated track record of creating economic value,while those that register a VERY POOR mark have been destroying economic value.

ValueRisk™. This is a proprietary Valuentum measure. ValueRisk™ indicates thehistorical volatility of key valuation drivers, including revenue, gross margin, earningsbefore interest, and enterprise free cash flow. The standard deviation of each measure iscalculated and scaled against last year's measure to arrive at a percentage deviation foreach item. These percentage deviations are weighted equally to arrive at thecorresponding fair value range for each stock, measured in percentage terms. The firm'sperformance is measured along the scale of LOW, MEDIUM, HIGH, and VERY HIGH.The ValueRisk™ rating for each firm also determines the fundamental beta of eachfirm along the following scale: LOW (0.85), MEDIUM (1), HIGH (1.15), VERY HIGH(1.3).

ValueTrend™. This is a proprietary Valuentum measure. ValueTrend™ indicates thetrajectory of the firm's return on invested capital (ROIC). Firms that earned an ROIClast year that was greater than the 3-year average of the measure earn a POSITIVErating. Firms that earned an ROIC last year that was less than the 3-year average of themeasure earn a NEGATIVE rating.

Business Quality Matrix. We compare the firm's ValueCreation™ and ValueRisk™ratings. The box is an easy way for investors to quickly assess the business quality ofa company. Firms that generate economic profits with little operating variabilityscore near the top right of the matrix.

Return on Invested Capital. At Valuentum, we place considerable emphasis onreturn on invested capital (both with and without goodwill). The measure focuses onthe return (earnings) the company is generating on its operating assets and is superiorto return on equity and return on assets, which can be skewed by a firm's leverage orexcess cash balance, respectively.

Range of Potential Outcomes. The firm's margin of safety is shown in the graphicof a normal distribution. We consider a firm to be undervalued if its stock price fallsalong the green line and overvalued if the stock price falls along the red line. Weconsider the firm to be fairly valued if its stock price falls along the yellow line.

Money Flow Index (MFI). The MFI is a technical indicator that measures buyingand selling pressure based on both price and volume. Traders typically use thismeasure to identify potential reversals with overbought and oversold levels. We use a14-week measure to rank firms along the following scale: EXTREMELYOVERBOUGHT (>90), OVERBOUGHT (80-90), NEUTRAL (20-80), OVERSOLD(10-20), EXTREMELY OVERSOLD (0-10).

Relative Value. We compare the firm's forward price-to earnings (PE) ratio and itsprice/earnings-to-growth (PEG) ratio to that of its peers. If both measures fall below thepeer median, the firm receives an ATTRACTIVE rating. If both are above the peermedian, the firm receives an UNATTRACTIVE rating. Any other combination resultsin a NEUTRAL rating.

Cash Flow Generation. Firms' cash flow generation capacity are measured along thescale of STRONG, MEDIUM, and WEAK. A firm with a 3-year historical free cashflow margin (free cash flow divided by sales) greater than 5% receives a STRONGrating, while firms earning less than 1% of sales as free cash flow receive a WEAKrating.

Financial Leverage. Based on the firm's normalized debt-to-EBITDA metric, we rank firms on the following scale: LOW, MEDIUM, and HIGH. Companies with a normalized debt-to-EBITDA ratio below 1.5 receive a LOW score, while those with a measure above 3 receive a HIGH score.

Timeliness Matrix. We compare the company's recent stock performance relative tothe market benchmark with our assessment of its valuation. Firms that areexperiencing near-term stock price outperformance and are undervalued by ourestimate may represent timely buys.

Stock Price Relative Strength. We assess the perfomance of the company's stockduring the past quarter, 13 weeks, relative to an ETF that mirrors the aggregateperformance of constituents of the stock market. Firms are measured along the scaleof STRONG, NEUTRAL, and WEAK. Companies that have outperformed themarket index by more than 2.5% during this 13-week period receive a STRONGrating, while firms that trailed the market index by more than 2.5% during this 13-week period receive a WEAK rating.

HRL Rating History Price Fair Value VBI7-Apr-22 $52.62 $48.00 618-Jun-21 $47.42 $46.00 315-Oct-20 $50.43 $44.00 617-Jul-20 $49.92 $46.00 611-Oct-19 $41.40 $35.00 318-Feb-19 $41.99 $35.00 331-Dec-18 $41.70 $35.00 317-Sep-18 $39.86 $35.00 611-May-18 $36.26 $32.00 619-Jan-18 $34.76 $32.00 615-Sep-17 $31.38 $32.00 39-Jun-17 $34.77 $35.00 613-Jan-17 $35.53 $36.00 329-Jul-16 $37.35 $42.00 6

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Disclosures, Disclaimers & Additional Sources

Copyright (c) 2017 by Valuentum, Inc. All rights reserved.No part of this publication may be reproduced in any form or by any means.The information contained in this report is not represented or warranted to be accurate, correct,complete, or timely. This report is for informational purposes only and should not be considered asolicitation to buy or sell any security. No warranty or guarantee may be created or extended bysales or promotional materials, whether by email or in any other format. The securities or strategiesmentioned herein may not be suitable for all types of investors. The information contained in thisreport does not constitute any advice, especially on the tax consequences of making any particularinvestment decision. This material is not intended for any specific type of investor and does nottake into account an investor's particular investment objectives, financial situation or needs. Thisreport is not intended as a recommendation of the security highlighted or any particular investmentstrategy. Before acting on any information found in this report, readers should consider whethersuch an investment is suitable for their particular circumstances, perform their own due-diligence,and if necessary, seek professional advice. The sources of the data used in this report are believed by Valuentum to be reliable, but the data’saccuracy, completeness or interpretation cannot be guaranteed. Assumptions, opinions, andestimates are based on our judgment as of the date of the report and are subject to change withoutnotice. Valuentum is not responsible for any errors or omissions or for results obtained from the useof this report and accepts no liability for how readers may choose to utilize the content. In no eventshall Valuentum be liable to any party for any direct, indirect, incidental, exemplary, compensatory,punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, withoutlimitation, lost income or lost profits and opportunity costs) in connection with any use of theinformation contained in this document. Investors should consider this report as only a single factorin making their investment decision. Valuentum is not a money manager, is not a registered investment advisor, and does not offerbrokerage or investment banking services. Valuentum has not received any compensation from thecompany or companies highlighted in this report. Valuentum, its employees, independentcontractors and affiliates may have long, short or derivative positions in the securities mentionedherein. Information and data in Valuentum’s valuation models and analysis may not capture allsubjective, qualitative influences such as changes in management, business and political trends, orlegal and regulatory developments. Redistribution is prohibited without written permission. Readersshould be aware that information in this work may have changed between when this work waswritten or created and when it is read. There is risk of substantial loss associated with investing infinancial instruments. Valuentum's company-specific forecasts used in its discounted cash flow model are rules-based.These rules reflect the experience and opinions of Valuentum's analyst team. Historical data used inour valuation model is provided by Xignite and from other publicly available sources includingannual and quarterly regulatory filings. Stock price and volume data is provided by Xignite. Nowarranty is made regarding the accuracy of any data or any opinions. Valuentum's valuation modelis based on sound academic principles, and other forecasts in the model such as inflation and theequity risk premium are based on long-term averages. The Valuentum proprietary automated text-generation system creates text that will vary by company and may often change for the samecompany upon subsequent updates. Valuentum uses its own proprietary stock investment style and industry classification systems. Peercompanies are selected based on the opinions of the Valuentum analyst team. Research reports anddata are updated periodically, though Valuentum assumes no obligation to update its reports,opinions, or data following publication in any form or format. Performance assessment ofValuentum metrics, including the Valuentum Buying Index, is ongoing, and we intend to updateinvestors periodically, though Valuentum assumes no obligation to do so. Not all information isavailable on all companies. There may be a lag before reports and data are updated for stock splitsand stock dividends. Past simulated performance, whether backtested or walk-forward or other, is not a guarantee offuture results. For general information about Valuentum's products and services, please contact usat [email protected] or visit our website at www.valuentum.com.

The High Yield Dividend Newsletter portfolio, the Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio are not real money portfolios. Any performance, including that in the Nelson Exclusive publication, is hypothetical and does not represent actual trading. Past performance is not a guarantee of future results.

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Valuentum has not owned and does not own any shares of stocks mentioned on its website or in this report. President of Investment Research Brian Nelson does not own any shares of stocks mentioned on Valuentum's website or in this report. Majority share owner of Valuentum, Elizabeth Nelson, currently has exposure to HON in her retirement account.

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hormel foods hrl fairly valued buying index™ 3 value rating

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