Wondering if anyone has any tips of building an operating model used for valuation for a commodities business. Some background info on the company: top 5 producer/processor/distributor of poultry, "mature" company with strong market share in the space that it operates in.
Like with any commodities business, the price of inputs/outputs heavily influences the businesses top line and gross margin, trickling down to year end profits. Although the company has seen consistent growth in terms of volume, fluctuations in feed prices(corn, soybean meal) and chicken prices has caused inconsistent performance historically.
How do you normalize cash flows and capture the value of a company in this industry as an on-going concern? I don't see chicken as a commodity that will become obsolete in the next 10-20 years, am I right to assume a terminal growth rate of 3%?