If there were ever a stock that Morningstar analysts would pound the table on, it’s International Flavors & Fragrances (IFF).

The wide-moat stock lands on our global list of best companies to invest in now, available in full to Investor subscribers. It has a stable dividend and stands to benefit from the long-term growth trend of the demand for healthier, more natural, and enhanced prepared foods—all that and an undervalued stock price, too.

International Flavors & Fragrances is a global leader in specialty ingredients. It holds an enviable portfolio focused on value-added products used in food and beverages, fragrances, personal care, enzymes, probiotics, and pharmaceuticals.

IFF’s products affect taste, smell, or mouth feel based on customer specifications. Its proprietary formulations drive revenue growth.

Rather than supplying simple flavor solutions, IFF can deliver innovative solutions that modulate the consumer experience. These “fine-tuning” solutions can reduce costs for customers by allowing for the use of cheaper ingredients, extend a product’s shelf life, or add probiotic nutrition.

The company’s offerings can also help customers remove undesirable content (fat, sugar, sodium) from products without sacrificing the consumer experience.

Key Morningstar Metrics for IFF

  • Fair Value Estimate: $140
  • Star Rating: 5 Stars
  • Economic Moat Rating: Wide
  • Moat Trend Rating: Stable

Economic Moat Rating


We assign a wide moat rating to IFF. The company’s highly valuable intangible assets in the form of proprietary formulations provide significant pricing power, while switching costs help ensure the durability of economic profit generation.

Because IFF operates in less cyclical end markets, financial results are very stable and major profit swings are unlikely. Accordingly, we have a high degree of confidence that positive economic profits will prove durable for at least the next 20 years.

Fair Value Estimate for IFF


Our fair value estimate is $140 per share. Our weighted average cost of capital for IFF is about 7%. Our stage 2 EBI growth rate is 4.5%, which reflects IFF’s pricing power from its specialty ingredients and growing demand for its products, especially in emerging markets as incomes rise.

We forecast roughly flat revenue in 2023 and an adjusted EBITDA decline as a global economic slowdown weighs on volume and leads to negative operating leverage.

Thereafter, the company should be able to increase revenue at a mid-single-digit rate through 2026 while expanding adjusted EBITDA at roughly 9.5% per year, near the upper end of management’s long-term guidance.

Risk and Uncertainty


The company faces stiff competition across its ingredients markets. If IFF is unable to develop new products to replace off-patent formulas or develop new ingredients to align with changing consumer preferences, its ability to command premium prices and generate attractive margins will deteriorate.

As a chemical producer, IFF faces some environmental, social, and governance risks associated with the environmental impact of its products. Regulatory changes may be the most considerable ESG risk.

Another risk is the company’s elevated debt levels, although we expect management to prioritize debt repayment over other uses of cash.

IFF Bulls Say

  • As the largest specialty ingredients producer globally, IFF has a portfolio of market-leading products spanning multiple industries.
  • The company is well positioned to capitalize on further growth in developing markets, where it generates the most sales.
  • IFF’s high R&D spending—around 6% of sales—acts as a barrier to entry, underpins innovation, and promotes future growth.

IFF Bears Say

  • IFF overpaid for the Frutarom and DuPont nutrition and biosciences acquisitions, leading to shareholder value destruction.
  • IFF’s non-flavor food and beverage ingredients could see slower growth and lower profits amid changing consumer preferences, leading to lower profit growth.
  • Around 40% of IFF’s sales are to developing markets, which brings increased volatility and exposure to currency, country, and geopolitical risks.