Lamb Weston Holdings, Inc. (LW): what the price assumes

Generated: 2026-07-29 · Exported: 2026-08-01 · Source: https://boothcheck.com/report/LW

Headline

Field	Value
Ticker	LW
Company	Lamb Weston Holdings, Inc.
Current price	$54.74/sh
Composition	North America 66% / International 34%

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

Field	Value
Inversion basis	whole-company
Multiple paid	16x operating income

The price sits below what even a 5%/yr operating-profit decline would warrant; the inversion reports a bound, not a solved growth path.

Solve inputs: computed at a 6.9% cost of capital with 4% terminal growth over a 5-year stage.

Reconcile: at the x-ray's 9.3% required return this reads ~10.3%/yr; the models below use their own rates.

How unusual the bet is: within-range

Reference	Value
vs own history	-0.57σ
cohort percentile (of 68 peers)	28
implied end-window share	0%

Valuation X-Ray

The price is supported by earnings-power and relative-multiple and growth-DCF value, while asset-based lands below the price. A value/asset-supported name, not a pure growth bet.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Family	Median price/FV	Models	Reads
Asset	2.18x	5	expensive
Earnings	1.23x	5	expensive
Relative	0.69x	5	justifies
Growth	1.01x	4	expensive

Families that justify the price: Earnings, Relative, Growth Families that call it expensive: Asset

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 9.0%); the inversion above states its own rate.

Per-Model Detail (n=19)

Model	Family	FV	Price/FV	Applicable	Methodology
DCF Perpetual Growth	Growth	$63.60	0.86x	yes	FCF base $0.6B, growth 2% (input: historical growth), terminal g 2.1%, WACC 9.0%, 5yr projection
DCF Exit Multiple	Growth	$56.36	0.97x	yes	Exit EV/EBITDA: 5.9x / 7.9x / 9.9x (bear / base = today's held flat / bull), 5yr
Relative Valuation	Relative	$73.28	0.75x	yes	P/E 22x (static sector reference · 2026-04), scenarios: 18.5x / 22.0x / 25.5x (bear / base = reference held flat / bull), EV/EBITDA 14x
Simple DDM	Growth	—	—	no	—
Two-Stage DDM	Growth	$52.34	1.05x	yes	Stage 1: 20% for 5yr, Stage 2: 3.5% perpetual
Simple Excess Return	Asset	$23.31	2.35x	yes	BV/sh $13.12, ROE (TTM) 16.4%, ke 9.3%
Two-Stage Excess Return	Asset	$30.67	1.78x	yes	5yr excess ROE then converge to ke=9.3%
Discounted Future Market Cap	Growth	$37.90	1.44x	yes	Rev $6.5B, growth 2% (input: historical growth; tapered), Terminal P/S: 1.0x / 1.2x / 1.4x (bear / base = today's held flat / bull, cap 8x)
Peter Lynch Fair Value	Relative	$74.55	0.73x	yes	EPS $2.13, growth 35% (input: historical EPS growth), PEG=0.73 (Undervalued)
Margin Trajectory	Growth	—	—	no	—
Earnings Power Value	Earnings	$36.57	1.50x	yes	Normalized EBIT (5y avg op income, one-time charges added back) $0.75B × (1−36%) / WACC 9.0% → EPV (no growth)
Residual Income	Asset	$31.04	1.76x	yes	BV $13.12 + 5yr PV of (ROE (TTM) 16.4% − Kₑ 9.3%) × BV; BV grows 8.8%/yr
Graham Number	Asset	$25.07	2.18x	yes	√(22.5 × EPS $2.13 × BVPS $13.12) — Graham's conservative floor
EV/EBITDA Relative	Relative	$98.15	0.56x	yes	EBITDA $0.99B × sector EV/EBITDA 14.0x
FCF Yield	Earnings	$47.51	1.15x	yes	FCF $634.3M / Kₑ 9.3% — zero-growth perpetuity
SBC-Adj FCF Yield	Earnings	$44.47	1.23x	yes	SBC-adj FCF $0.60B (FCF $0.63B − SBC $0.04B) capitalized at Kₑ
Ben Graham Formula	Earnings	$68.73	0.80x	yes	EPS $2.13 × (8.5 + 2×15.0%) × (4.4 / 5.3%)
ROIC-Justified P/B	Asset	$5.70	9.60x	yes	BV $13.12 × (ROIC 3.9% / WACC 9.0%)
P/Sales Sector	Relative	$93.58	0.58x	yes	Revenue $6.52B × sector P/S 2.0x
PEG Fair Value	Relative	$79.88	0.69x	yes	EPS $2.13 × (PEG 1.5 × growth 25.0% (input: historical EPS growth)) → PE 37.5x
Earnings Yield	Earnings	$23.03	2.38x	yes	EPS $2.13 / required return 9.3% (Rf 4.3% + ERP 5.0%)
Funds From Operations Multiple	Relative	—	—	no	—
Clinical Phase NPV	Growth	—	—	no	—
Merton	Asset	—	—	no	—
V5 Mechanical	—	—	—	no	—

Solvency

Field	Value
Net debt	$4.0b
Net debt / NOPAT (after-tax)	10.24x
Net debt / operating income (pre-tax)	6.56x
Share count CAGR (buyback)	-1.1%
Burning cash	no

Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.

Bullet Takeaways

• Lamb Weston is a leading global french-fry supplier whose volume turned positive again, up 7% in the third quarter on customer wins, after two years of capacity-driven volume declines, with the price supported by earnings, relative, and growth methods.
• The biggest risk is leverage plus a pricing squeeze: net debt of about $4.1 billion against roughly $1 billion of EBITDA, with the 7% volume gain offset by a 7% price/mix decline and about a third of US contracts up for renegotiation in 2026.
• Watch the margin path and the activist program: JANA, Continental Grain, and Starboard are pushing a 25% adjusted EBITDA margin by fiscal 2029, the target the recovery thesis rests on.

Bull Case

The trajectory that matters for Lamb Weston is volume, and it has turned. After two fiscal years of declining sales volume driven by an industry that overbuilt capacity into softening restaurant demand, the third quarter of fiscal 2026 delivered a 7% volume increase on significant customer wins and strong North American retention. Volume is the leading indicator for a commodity-processing business: winning back shelf and contract share is what fills the plants, and full plants are what drive the margin recovery. The company raised its full-year sales and EBITDA outlook while cutting planned capital expenditure, the combination that signals management sees demand stabilizing and no longer needs to spend to chase it.

The franchise itself is genuinely hard to displace. Lamb Weston is one of the largest suppliers of frozen french fries and potato products in the world, embedded in the supply chains of the major quick-service restaurant chains. Switching fry suppliers at the scale of a global burger chain is a logistical and quality-control undertaking few customers attempt lightly, which gives the volume base a stickiness that the recent contract losses, while real, do not fully erase. With about $6.5 billion in revenue and a 16.4% return on equity even in a pressured year, the underlying economics of the business are sound; the recent weakness is cyclical and capacity-driven, not a structural loss of the franchise.

The activist involvement is, on balance, a catalyst for the bull case rather than a warning. JANA Partners and Continental Grain took a stake in late 2024 and reshaped the board, adding former chief executives of major food companies, and Starboard Value has since added pressure, with both pushing for cost reductions and a 25% adjusted EBITDA margin by fiscal 2029. That is a credible, specific margin target backed by experienced operators and engaged owners. The company has affirmed its dividend and continued buybacks through the downturn, and the price is supported by the earnings-power, relative, and growth methods, which is the profile of a value name where the recovery and the cost program are the upside the static methods do not yet credit.

Bear Case

The structural vulnerability sits in the balance sheet and the capital it has absorbed. Lamb Weston carries about $4.1 billion of net debt against EBITDA of roughly $1 billion, a meaningful leverage load for a business whose margins have been compressing. That debt was built up partly to fund a large capacity expansion, and the timing was unfortunate: the 10-K acknowledges that market demand for frozen potato products had "generally been balanced with industry capacity," but that in fiscal 2024 and continuing into fiscal 2025 the company "experienced declines in sales volume" as that balance broke. The company added capacity into a market that was simultaneously softening, and the resulting underutilization is exactly what pressures the margins that have to service the debt. Leverage plus a capacity overhang is the combination that turns a cyclical dip into a multi-year margin problem.

The pricing dynamic exposes the real weakness even inside the encouraging volume number. Third-quarter volume rose 7%, but price and mix fell 7%, almost exactly offsetting it. Winning back volume by conceding on price is not the same as a healthy recovery; it is the signature of an industry with too much capacity competing for the same restaurant customers. Roughly a third of Lamb Weston's US contracts come up for renegotiation in 2026, and the company already lost US customers in 2024 even after agreeing to lower pricing. Each renegotiation is an opportunity for a competitor with idle capacity to undercut, and the spread between potato costs and contract prices is where the entire margin lives.

The demand backdrop is outside the company's control. Lamb Weston's fortunes track restaurant traffic, and traffic at the quick-service chains it supplies has softened as consumers eat out less and trade down amid persistent inflation. The activists are pushing a 25% EBITDA margin target by fiscal 2029, but that target assumes both a cost program executing and the demand environment cooperating, and the second is not guaranteed. The earnings-power and relative methods support the price today, but the asset-based method already reads the stock as expensive, reflecting the heavy fixed-asset base relative to its current returns. If restaurant traffic stays weak and the contract renegotiations go against the company, the recovery the price assumes stalls, and the leverage makes the downside sharper than a less-indebted food company would face.

Valuation

Lamb Weston reads as a value and asset-supported name where the recovery is the unpaid-for upside. The earnings-power, relative-multiple, and growth methods all support the price, while only the asset-based method calls it expensive, reflecting the heavy plant-and-equipment base relative to current returns. Inverting the price into an assumption, the market is paying a modest multiple of operating income, low enough that the price sits below what even a flat-to-declining profit path would warrant. The buyer is not underwriting a growth story; the price already accommodates a business merely stabilizing, with the volume recovery and the activist-driven cost program as upside the static methods do not yet reflect.

The methods cluster informatively around the current level. The free-cash-flow capitalization of more than $600 million of free cash flow lands near the price, the relative-multiple lens at a consumer-staples sector P/E reaches above it, and the book-value-plus-profitability methods sit modestly above as well. That clustering says the market is applying a discount for the capacity overhang and the contract-renegotiation risk, not for any doubt about the cash the business generates. The discount is the opportunity and the warning at once: a buyer pays a below-sector price for a sticky franchise, but the discount exists because the volume-up, price-down dynamic and the leverage are real constraints on how fast the margin can recover.

Solvency is the dimension that bounds the downside and shapes the risk. Net debt of about $4.1 billion against roughly $1 billion of EBITDA is real leverage, and while the company is not burning cash, generating over $600 million of free cash flow and affirming its dividend, the debt limits flexibility if the recovery stalls. The decision to cut planned capital expenditure to about $400 million is the right move, easing the cash drain and signaling discipline after the capacity overbuild. The decisive variable for the price is the margin path: whether the volume wins convert into profit as price stabilizes and the cost program lands, because that is what the activists are targeting and what the supportive methods quietly assume, against a leveraged balance sheet that leaves less room for error.

Catalysts

The third-quarter fiscal 2026 report on April 1 showed a recovery underway with a catch. Net sales rose to $1,564.8 million and adjusted EBITDA was $271.7 million, with net income of $54.0 million and adjusted diluted earnings of $0.72 per share. The encouraging line was a 7% volume increase on customer wins and strong North American retention, though it was offset by a 7% decline in price and mix. The company raised the midpoint of its full-year net-sales and EBITDA outlook, guiding to net sales of $6.45 to $6.55 billion and adjusted EBITDA of $1.08 to $1.14 billion, while cutting planned capital expenditure to about $400 million and affirming its $0.38 quarterly dividend.

The activist campaign is the defining forward dynamic. JANA Partners and Continental Grain reshaped the board after their late-2024 stake, adding former chief executives from major food companies, and Starboard Value delivered a letter to the CEO on March 9, 2026, with both pressing for cost cuts and a 25% adjusted EBITDA margin by fiscal 2029. The catalysts that matter are the 2026 contract renegotiations, since roughly a third of US contracts reprice and each is a chance for share gains or losses on price, and the execution of the cost-reduction program, which is what would turn the volume recovery into the margin expansion the activists and the price are targeting.

Peer Cohorts (Per Segment, With Filing Citations)

Core business (reported)

• MZTI (The Marzetti Company)
• FY2025 10-K: Foodservice segments. Efficient and cost-effective production remains a key focus as evidenced by our cost savings initiatives. Certain items are also manufactured and packaged by third parties located in the United States, Canada and Europe. COMPETITION All of the markets in which we sell food products are highly…
• FY2025 10-K: …by account specific to the time lapse between the actual change in ingredient and freight costs we incur and the effective date of the associated price increase or decrease. As a result, the reported operating margins of the Foodservice segment are subject to increased volatility during periods of rapidly rising or…
• CAG (CONAGRA BRANDS, INC.)
• FY2025 10-K: …including retail channel preferences, and consumer price sensitivity continue to contribute to increased competition. Our 12 Table of Contents principal competitors have substantial financial, marketing, and other resources. Increased competition can reduce our sales due to loss of market share or the need to reduce…
• FY2025 10-K: …competitive response from one or more of our competitors to our marketplace efforts, or a consumer shift towards more generic, lower-priced, or other value offerings, could result in us reducing pricing, increasing marketing or other expenditures, or losing market share. Our margins and profits could decrease if a…
• CPB (THE CAMPBELL'S COMPANY)
• FY2025 10-K: …with the acquisition of Sovos Brands; and • $35 million of net periodic benefit income, including pension and postretirement actuarial gains of $15 million. Operating Earnings Segment operating earnings increased 1% in 2025 from 2024 and increased 6% in 2024 from 2023. An analysis of operating earnings by segment…
• FY2025 10-K: …competition in all of our categories. This competition arises from numerous competitors of varying sizes across multiple food and beverage categories, and includes producers of private label products, as well as other branded food and beverage manufacturers. Private label products are generally sold at lower prices…
• SJM (THE J. M. SMUCKER COMPANY)
• FY2025 10-K: …consumer preferences. Positive factors pertaining to our competitive position include well-recognized brands, high-quality products, consumer trust, experienced brand and category management, varied product offerings, product innovation, responsive customer service, and an integrated distribution network. The…
• FY2025 10-K: …in the categories in which we compete, appealing to different consumer segments. We closely monitor the price gap, or price premium, between our brands and private label brands, with the view that value is about more than price and the expectation that number one brands will continue to be an integral part of…
• GIS (GENERAL MILLS INC)
• FY2025 10-K: …of net sales of our North America Retail segment. No other customer accounted for 10 percent or more of our consolidated net sales. For further information on significant customers, please refer to Note 8 to the Consolidated Financial Statements in Item 8 of this report. Competition The human and pet food categories…
• FY2025 10-K: …may not foot due to rounding. (a) Measured in tons based on the stated weight of our product shipments. North America Foodservice net sales increased 2 percent in fiscal 2025 compared to fiscal 2024, driven by an increase in contributions from volume growth and favorable net price realization and mix. The components…
• POST (Post Holdings, Inc.)
• FY2025 10-K: …Competition The human and pet food categories in which we operate are highly competitive. Competition is based on, among other things, price, brand appeal, recognition and loyalty, taste, product quality and safety, nutritional profile, ingredients, effective promotional activities, product-related certifications,…
• FY2025 10-K: …and our customers' ability to compete in our respective product categories, including the success of pricing, advertising and promotional programs, declines in demand for our products and the ability to anticipate and respond to changes in consumer and customer preferences and behaviors; • our ability to hire and…
• MDLZ (Mondelez International, Inc.)
• FY2025 10-K: …and powdered beverages around the world. We aim to be the global leader in snacking. Our strategy is to drive long-term growth by focusing on four strategic priorities: accelerating consumer-centric growth, driving operational excellence, creating a winning growth culture and scaling sustainable snacking. We believe…
• FY2025 10-K: …units while empowering our local and commercial operations to respond faster to changing consumer preferences and capitalize on growth opportunities. We believe our efforts to continue advancing a winning growth culture will help drive profitable top-line growth. 3 Table of Contents • Scale sustainable snacking . We…
• HRL (HORMEL FOODS CORPORATION)
• FY2025 10-K: …joint venture. 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.…
• FY2025 10-K: …and the Company's current assumptions for raw material costs. From a bottom-line perspective, segment profit growth from all three segments is expected in fiscal 2026. Diluted earnings per share are expected to be $1.29 to $1.39 and adjusted diluted earnings per share are expected to be $1.43 to $1.51. Earnings are…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.

Sources

Lamb Weston Q3 FY2026 results, April 2026 · activist reporting, 2026 · Lamb Weston Q3 FY2026 guidance, April 2026