Brown-Forman Corp Valuation – March 2019 #BF.B

Company Profile (excerpt from Reuters): Brown-Forman Corporation, incorporated on October 19, 1933, is a spirit and wine company. The Company manufactures, bottles, imports, exports, markets and sells a range of alcoholic beverages. The Company has a portfolio of approximately 40 spirit, wine and ready-to-drink cocktail (RTD) brands. The Company’s principal brands include Jack Daniel’s Tennessee Whiskey, Jack Daniel’s RTDs, Jack Daniel’s Tennessee Honey, Gentleman Jack Rare Tennessee Whiskey, Jack Daniel’s Tennessee Fire, Jack Daniel’s Single Barrel Collection, Jack Daniel’s Sinatra Select, Jack Daniel’s Winter Jack, Jack Daniel’s No. 27 Gold Tennessee Whiskey, Finlandia Vodkas, Finlandia RTDs, Korbel California Champagnes, Korbel California Brandy, Woodford Reserve Kentucky Bourbons, el Jimador Tequilas, el Jimador New Mix RTDs, Herradura Tequilas, Canadian Mist Canadian Whisky, Sonoma-Cutrer California Wines, Early Times Kentucky Whisky and Bourbon, Chambord Liqueur, Old Forester Kentucky Bourbon, Antiguo Tequila, Pepe Lopez Tequila, Santa Dose Cachaca and Collingwood Canadian Whisky.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of BF.B – March 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

 

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $24,015,987,587 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.08 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 60.76% Pass
6. Moderate PEmg Ratio PEmg < 20 31.88 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 16.19 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 3.08 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.24 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.58
MG Growth Estimate 5.27%
MG Value $30.07
Opinion Overvalued
MG Grade C+
MG Value based on 3% Growth $22.90
MG Value based on 0% Growth $13.42
Market Implied Growth Rate 11.69%
Current Price $50.35
% of Intrinsic Value 167.46%

Brown-Forman Corporation Class B is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the high PEmg and PB ratios. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $1.17 in 2015 to an estimated $1.58 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 11.69% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Brown-Forman Corporation Class B revealed the company was trading above its Graham Number of $10.05. The company pays a dividend of $0.61 per share, for a yield of 1.2% Its PEmg (price over earnings per share – ModernGraham) was 31.88, which was above the industry average of 22.75. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-1.91.

Brown-Forman Corporation Class B receives an average overall rating in the ModernGraham grading system, scoring a C+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$1.91
Graham Number $10.05
PEmg 31.88
Current Ratio 3.08
PB Ratio 16.19
Current Dividend $0.61
Dividend Yield 1.21%
Number of Consecutive Years of Dividend Growth 20

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 1/1/2019
Total Current Assets $2,755,000,000
Total Current Liabilities $895,000,000
Long-Term Debt $2,301,000,000
Total Assets $5,163,000,000
Intangible Assets $1,405,000,000
Total Liabilities $3,670,000,000
Shares Outstanding (Diluted Average) 480,099,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.64
Apr2018 $1.48
Apr2017 $1.37
Apr2016 $2.09
Apr2015 $1.28
Apr2014 $1.22
Apr2013 $1.10
Apr2012 $0.95
Apr2011 $1.04
Apr2010 $0.81
Apr2009 $0.77
Apr2008 $0.76
Apr2007 $0.67
Apr2006 $0.55
Apr2005 $0.54
Apr2004 $0.43
Apr2003 $0.35
Apr2002 $0.35
Apr2001 $0.36
Apr2000 $0.34
Apr1999 $0.31

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.58
Apr2018 $1.53
Apr2017 $1.51
Apr2016 $1.49
Apr2015 $1.17
Apr2014 $1.08
Apr2013 $0.99
Apr2012 $0.91
Apr2011 $0.86
Apr2010 $0.75
Apr2009 $0.70
Apr2008 $0.64
Apr2007 $0.56
Apr2006 $0.48
Apr2005 $0.43
Apr2004 $0.38
Apr2003 $0.35

Recommended Reading:

Other ModernGraham posts about the company

Brown-Forman Corp Valuation – May 2018 $BF.B
Brown-Forman Corporation – February 2017 $BF.B
5 Speculative and Overvalued Companies to Avoid – November 2015
Brown-Forman Corporation Analysis – September 2015 Update $BF/B
Brown-Forman Corporation Analysis – June 2015 Update $BF.B

Other ModernGraham posts about related companies

Constellation Brands Inc Valuation – March 2019 #STZ
Philip Morris International Inc Valuation – January 2019 $PM
Altria Group Inc Valuation – January 2019 $MO
Molson Coors Brewing Co Valuation – January 2019 $TAP
Boston Beer Company Inc Valuation – July 2018 $SAM
Constellation Brands Inc Valuation – May 2018 $STZ
Brown-Forman Corp Valuation – May 2018 $BF.B
Philip Morris International Inc Valuation – March 2018 $PM
Altria Group Inc Valuation – March 2018 $MO
Molson Coors Brewing Co Valuation – March 2018 $TAP

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Brown-Forman Corp Valuation – May 2018 $BF.B

Company Profile (excerpt from Reuters): Brown-Forman Corporation, incorporated on October 19, 1933, is a spirit and wine company. The Company manufactures, bottles, imports, exports, markets and sells a range of alcoholic beverages. The Company has a portfolio of approximately 40 spirit, wine and ready-to-drink cocktail (RTD) brands. The Company’s principal brands include Jack Daniel’s Tennessee Whiskey, Jack Daniel’s RTDs, Jack Daniel’s Tennessee Honey, Gentleman Jack Rare Tennessee Whiskey, Jack Daniel’s Tennessee Fire, Jack Daniel’s Single Barrel Collection, Jack Daniel’s Sinatra Select, Jack Daniel’s Winter Jack, Jack Daniel’s No. 27 Gold Tennessee Whiskey, Finlandia Vodkas, Finlandia RTDs, Korbel California Champagnes, Korbel California Brandy, Woodford Reserve Kentucky Bourbons, el Jimador Tequilas, el Jimador New Mix RTDs, Herradura Tequilas, Canadian Mist Canadian Whisky, Sonoma-Cutrer California Wines, Early Times Kentucky Whisky and Bourbon, Chambord Liqueur, Old Forester Kentucky Bourbon, Antiguo Tequila, Pepe Lopez Tequila, Santa Dose Cachaca and Collingwood Canadian Whisky.

BF.B Chart

BF.B data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of BF.B – May 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $27,196,217,831 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.78 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 85.13% Pass
6. Moderate PEmg Ratio PEmg < 20 38.26 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 28.80 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.78 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.53 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.49
MG Growth Estimate 5.68%
MG Value $29.65
Opinion Overvalued
MG Grade C+
MG Value based on 3% Growth $21.65
MG Value based on 0% Growth $12.69
Market Implied Growth Rate 14.89%
Current Price $57.17
% of Intrinsic Value 192.80%

Brown-Forman Corporation is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg and PB ratios. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $1.08 in 2014 to an estimated $1.49 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 14.89% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Brown-Forman Corporation revealed the company was trading above its Graham Number of $9.4. The company pays a dividend of $0.56 per share, for a yield of 1% Its PEmg (price over earnings per share – ModernGraham) was 38.28, which was above the industry average of 24.61. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-1.98.

Brown-Forman Corporation receives an average overall rating in the ModernGraham grading system, scoring a C+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$1.98
Graham Number $9.40
PEmg 38.29
Current Ratio 1.78
PB Ratio 28.82
Current Dividend $0.56
Dividend Yield 0.99%
Number of Consecutive Years of Dividend Growth 20

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 1/1/2018
Total Current Assets $2,641,000,000
Total Current Liabilities $1,486,000,000
Long-Term Debt $1,770,000,000
Total Assets $5,042,000,000
Intangible Assets $1,448,000,000
Total Liabilities $3,841,000,000
Shares Outstanding (Diluted Average) 605,305,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.38
Apr2017 $1.37
Apr2016 $2.09
Apr2015 $1.28
Apr2014 $1.22
Apr2013 $1.10
Apr2012 $0.95
Apr2011 $1.04
Apr2010 $0.81
Apr2009 $0.77
Apr2008 $0.76
Apr2007 $0.67
Apr2006 $0.55
Apr2005 $0.54
Apr2004 $0.43
Apr2003 $0.35
Apr2002 $0.35
Apr2001 $0.36
Apr2000 $0.34
Apr1999 $0.31
Apr1998 $0.29

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.49
Apr2017 $1.51
Apr2016 $1.49
Apr2015 $1.17
Apr2014 $1.08
Apr2013 $0.99
Apr2012 $0.91
Apr2011 $0.86
Apr2010 $0.75
Apr2009 $0.70
Apr2008 $0.64
Apr2007 $0.56
Apr2006 $0.48
Apr2005 $0.43
Apr2004 $0.38
Apr2003 $0.35
Apr2002 $0.34

Recommended Reading:

Other ModernGraham posts about the company

Brown-Forman Corporation – February 2017 $BF.B
5 Speculative and Overvalued Companies to Avoid – November 2015
Brown-Forman Corporation Analysis – September 2015 Update $BF/B
Brown-Forman Corporation Analysis – June 2015 Update $BF.B
18 Companies in the Spotlight This Week – 3/21/15

Other ModernGraham posts about related companies

Philip Morris International Inc Valuation – March 2018 $PM
Altria Group Inc Valuation – March 2018 $MO
Molson Coors Brewing Co Valuation – March 2018 $TAP
Molson Coors Brewing Co Valuation – Initial Coverage $TAP
Constellation Brands Inc Valuation – February 2017 $STZ
Brown-Forman Corporation – February 2017 $BF.B
Boston Beer Company Inc Valuation – Initial Coverage $SAM
Constellation Brands Inc Valuation – August 2016 $STZ
Reynolds American Inc Valuation – July 2016 $RAI
Philip Morris International Inc Valuation – June 2016 $PM

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Brown-Forman Corporation – February 2017 $BF.B

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – January 2017.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Brown-Forman Corporation (BF.B) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Brown-Forman Corporation is a spirit and wine company. The Company manufactures, bottles, imports, exports, markets and sells a range of alcoholic beverages. The Company has a portfolio of approximately 40 spirit, wine and ready-to-drink cocktail (RTD) brands. Its principal brands include Jack Daniel’s Tennessee Whiskey, Jack Daniel’s RTDs, Jack Daniel’s Tennessee Honey, Gentleman Jack Rare Tennessee Whiskey, Jack Daniel’s Tennessee Fire, Jack Daniel’s Single Barrel Collection, Jack Daniel’s Sinatra Select, Jack Daniel’s Winter Jack, Jack Daniel’s No. 27 Gold Tennessee Whiskey, Finlandia Vodkas, Finlandia RTDs, Korbel California Brandy, Woodford Reserve Kentucky Bourbons, el Jimador Tequilas, el Jimador New Mix RTDs, Herradura Tequilas, Canadian Mist Canadian Whisky, Sonoma-Cutrer California Wines, Early Times Kentucky Whisky and Bourbon, Chambord Liqueur, Old Forester Kentucky Bourbon, Antiguo Tequila, Pepe Lopez Tequila, Santa Dose Cachaca and Collingwood Canadian Whisky.

BF.B Chart

BF.B data by YCharts

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Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Recent valuations of the components of the Dow Jones Industrial Average are available for free members, including this one of Microsoft Corporation.  In addition, here is a post detailing what can be found within each individual company’s valuation.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of BF.B – February 2017

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $17,371,465,523 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.80 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 103.33% Pass
6. Moderate PEmg Ratio PEmg < 20 23.98 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 13.79 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.80 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.18 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.88
MG Growth Estimate 7.91%
MG Value $45.80
Opinion Fairly Valued
MG Grade B
MG Value based on 3% Growth $27.30
MG Value based on 0% Growth $16.00
Market Implied Growth Rate 7.74%
Current Price $45.14
% of Intrinsic Value 98.55%

Brown-Forman Corporation is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the high PEmg and PB ratios. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $1.23 in 2013 to an estimated $1.88 for 2017. This level of demonstrated earnings growth supports the market’s implied estimate of 7.74% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Brown-Forman Corporation revealed the company was trading above its Graham Number of $11.33. The company pays a dividend of $0.68 per share, for a yield of 1.5% Its PEmg (price over earnings per share – ModernGraham) was 23.98, which was below the industry average of 28.57, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-2.31.

Brown-Forman Corporation performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$2.31
Graham Number $11.33
PEmg 23.98
Current Ratio 2.80
PB Ratio 13.79
Current Dividend $0.68
Dividend Yield 1.51%
Number of Consecutive Years of Dividend Growth 20

 

 

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Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures 

Balance Sheet Information 10/1/2016
Total Current Assets $2,530,000,000
Total Current Liabilities $904,000,000
Long-Term Debt $1,917,000,000
Total Assets $4,720,000,000
Intangible Assets $1,383,000,000
Total Liabilities $3,437,000,000
Shares Outstanding (Diluted Average) 391,848,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.71
Apr2016 $2.61
Apr2015 $1.61
Apr2014 $1.53
Apr2013 $1.38
Apr2012 $1.19
Apr2011 $1.30
Apr2010 $1.01
Apr2009 $0.96
Apr2008 $0.95
Apr2007 $0.84
Apr2006 $0.69
Apr2005 $0.67
Apr2004 $0.53
Apr2003 $0.44
Apr2002 $0.44
Apr2001 $0.45
Apr2000 $0.42
Apr1999 $0.39
Apr1998 $0.36
Apr1997 $0.33

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.88
Apr2016 $1.87
Apr2015 $1.46
Apr2014 $1.35
Apr2013 $1.23
Apr2012 $1.13
Apr2011 $1.08
Apr2010 $0.94
Apr2009 $0.88
Apr2008 $0.80
Apr2007 $0.70
Apr2006 $0.60
Apr2005 $0.54
Apr2004 $0.47
Apr2003 $0.44
Apr2002 $0.43
Apr2001 $0.41

Recommended Reading:

Other ModernGraham posts about the company

5 Speculative and Overvalued Companies to Avoid – November 2015
Brown-Forman Corporation Analysis – September 2015 Update $BF/B
Brown-Forman Corporation Analysis – June 2015 Update $BF.B
18 Companies in the Spotlight This Week – 3/21/15
Brown-Forman Corporation Quarterly Valuation – March 2015 $BF.B

Other ModernGraham posts about related companies

Boston Beer Company Inc Valuation – Initial Coverage $SAM
Constellation Brands Inc Valuation – August 2016 $STZ
Reynolds American Inc Valuation – July 2016 $RAI
Philip Morris International Inc Valuation – June 2016 $PM
Altria Group Inc Valuation – June 2016 $MO
Constellation Brands Inc Valuation – January 2016 Update $STZ
Molson Coors Brewing Co. Valuation – November 2015 Update $TAP
Brown-Forman Corporation Analysis – September 2015 Update $BF/B
Brown-Forman Corporation Analysis – June 2015 Update $BF.B
Philip Morris International Annual Valuation – 2015 $PM

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Brown-Forman Corporation Analysis – June 2015 Update $BF.B

220px-Brown–Forman_logo.svgBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Most Undervalued Companies for the Defensive Investor – June 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Brown-Forman Corporation (BF.B) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Brown-Forman Corporation primarily manufactures, bottles, imports, exports, markets, and sells a variety of alcoholic beverage brands. The Company’s principal brands are Jack Daniel’s Tennessee Whiskey, Jack Daniel’s Tennessee Whiskey, Pepe Lopez Tequilas, Jack Daniel’s Single Barrel, Woodford Reserve Bourbons, Jack Daniel’s Ready-to-Drinks, Canadian Mist Blended Canadian Whiskies, Jack Daniel’s Tennessee Honey, Chambord Liqueur, Jack Daniel’s Winter Jack Chambord Vodka, Gentleman Jack, Collingwood Canadian Whisky, Southern Comfort, Early Times Bourbon, Southern Comfort Ready-to-Drinks, Early Times flavored line extensions, Southern Comfort flavored line extensions, Early Times Kentucky Whisky, Finlandia Vodkas, Korbel California Champagnes, Finlandia Ready-to-Drinks, Little Black Dress Vodkas, Antiguo Tequila, Maximus Vodkas, el Jimador Tequilas, Old Forester Bourbon, el Jimador New Mix Ready-to-Drinks, Sonoma-Cutrer Wines, Herradura Tequilas, and Tuaca Liqueur.
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Defensive Investor – must pass at least 6 of the following 7 tests: Score = 5/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – PASS
  3. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – PASS
  6. Moderate PEmg ratio – PEmg is less than 20 – FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 5/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – PASS
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $101.15
MG Value $56.51
MG Opinion Overvalued
Value Based on 3% Growth $42.42
Value Based on 0% Growth $24.87
Market Implied Growth Rate 13.04%
Net Current Asset Value (NCAV) -$0.16
PEmg 34.58
Current Ratio 2.35
PB Ratio 11.21

Balance Sheet – March 2015

Current Assets $2,254,000,000
Current Liabilities $958,000,000
Total Debt $748,000,000
Total Assets $4,193,000,000
Intangible Assets $1,218,000,000
Total Liabilities $2,288,000,000
Outstanding Shares 211,200,000

Earnings Per Share

2015 $3.21
2014 $3.06
2013 $2.75
2012 $2.37
2011 $2.60
2010 $2.01
2009 $1.91
2008 $1.90
2007 $1.68
2006 $1.39
2005 $1.34

Earnings Per Share – ModernGraham

2015 $2.93
2014 $2.71
2013 $2.46
2012 $2.27
2011 $2.15
2010 $1.88

Dividend History

Conclusion:

Brown-Forman Corporation qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the high PEmg and PB ratios.  The Enterprising Investor has no initial concerns.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with the evaluation.  As for a valuation, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $2.15 in 2011 to only $2.93 for 2015.  This level of demonstrated earnings growth does not support the market’s implied estimate of 13.04% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value below the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Brown-Forman Corporation (BF.B)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

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Brown-Forman Corporation Quarterly Valuation – March 2015 $BF.B

220px-Brown–Forman_logo.svgBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Most Undervalued Companies for the Defensive Investor – March 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Brown-Forman Corporation (BF.B) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Brown-Forman Corporation primarily manufactures, bottles, imports, exports, markets, and sells a variety of alcoholic beverage brands. The Company’s principal brands are Jack Daniel’s Tennessee Whiskey, Jack Daniel’s Tennessee Whiskey, Pepe Lopez Tequilas, Jack Daniel’s Single Barrel, Woodford Reserve Bourbons, Jack Daniel’s Ready-to-Drinks, Canadian Mist Blended Canadian Whiskies, Jack Daniel’s Tennessee Honey, Chambord Liqueur, Jack Daniel’s Winter Jack Chambord Vodka, Gentleman Jack, Collingwood Canadian Whisky, Southern Comfort, Early Times Bourbon, Southern Comfort Ready-to-Drinks, Early Times flavored line extensions, Southern Comfort flavored line extensions, Early Times Kentucky Whisky, Finlandia Vodkas, Korbel California Champagnes, Finlandia Ready-to-Drinks, Little Black Dress Vodkas, Antiguo Tequila, Maximus Vodkas, el Jimador Tequilas, Old Forester Bourbon, el Jimador New Mix Ready-to-Drinks, Sonoma-Cutrer Wines, Herradura Tequilas, and Tuaca Liqueur.

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 5/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – PASS
  3. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – PASS
  6. Moderate PEmg ratio – PEmg is less than 20 – FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 5/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – PASS
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $89.74
MG Value $55.51
MG Opinion Overvalued
Value Based on 3% Growth $42.18
Value Based on 0% Growth $24.72
Market Implied Growth Rate 11.18%
Net Current Asset Value (NCAV) $0.42
PEmg 30.85
Current Ratio 2.57
PB Ratio 9.35

Balance Sheet – January 2015

Current Assets $2,209,000,000
Current Liabilities $860,000,000
Total Debt $748,000,000
Total Assets $4,161,000,000
Intangible Assets $1,226,000,000
Total Liabilities $2,120,000,000
Outstanding Shares 212,600,000

Earnings Per Share

2015 (estimate) $3.16
2014 $3.06
2013 $2.75
2012 $2.37
2011 $2.60
2010 $2.01
2009 $1.91
2008 $1.90
2007 $1.68
2006 $1.39
2005 $1.34

Earnings Per Share – ModernGraham

2015 (estimate) $2.91
2014 $2.71
2013 $2.46
2012 $2.27
2011 $2.15
2010 $1.88

Dividend History

Conclusion:

Brown-Forman Corporation (BF.B) is suitable for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor is concerned by the high PEmg and PB ratios, while the Enterprising Investor has no initial concerns.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel very comfortable proceeding with further research and comparing the company to other opportunities.  From a valuation side of things, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $2.15 in 2011 to only an estimated $2.91 for 2015.  This level of demonstrated growth does not support the market’s implied estimate of 11.18% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value below the price.

Be sure to check out previous ModernGraham valuations of Brown-Forman Corporation (BF.B) for greater perspective!

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Brown-Forman Corporation (BF.B)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in Brown-Forman Corporation (BF.B) or in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Brown-Forman Corporation Quarterly Valuation – December 2014 $BF.B

220px-Brown–Forman_logo.svgBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Most Undervalued Companies for the Defensive Investor – December 2014.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Brown-Forman Corporation (BF.B) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Brown-Forman Corporation primarily manufactures, bottles, imports, exports, markets, and sells a variety of alcoholic beverage brands. The Company’s principal brands are Jack Daniel’s Tennessee Whiskey, Jack Daniel’s Tennessee Whiskey, Pepe Lopez Tequilas, Jack Daniel’s Single Barrel, Woodford Reserve Bourbons, Jack Daniel’s Ready-to-Drinks, Canadian Mist Blended Canadian Whiskies, Jack Daniel’s Tennessee Honey, Chambord Liqueur, Jack Daniel’s Winter Jack Chambord Vodka, Gentleman Jack, Collingwood Canadian Whisky, Southern Comfort, Early Times Bourbon, Southern Comfort Ready-to-Drinks, Early Times flavored line extensions, Southern Comfort flavored line extensions, Early Times Kentucky Whisky, Finlandia Vodkas, Korbel California Champagnes, Finlandia Ready-to-Drinks, Little Black Dress Vodkas, Antiguo Tequila, Maximus Vodkas, el Jimador Tequilas, Old Forester Bourbon, el Jimador New Mix Ready-to-Drinks, Sonoma-Cutrer Wines, Herradura Tequilas, and Tuaca Liqueur.

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 5/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – PASS
  3. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – PASS
  6. Moderate PEmg ratio – PEmg is less than 20 – FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 5/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – PASS
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $86.56
MG Value $55.71
MG Opinion Overvalued
Value Based on 3% Growth $42.22
Value Based on 0% Growth $24.75
Market Implied Growth Rate 10.61%
Net Current Asset Value (NCAV) $0.61
PEmg 29.73
Current Ratio 3.39
PB Ratio 8.91

Balance Sheet – September 2014

Current Assets $2,299,000,000
Current Liabilities $678,000,000
Total Debt $998,000,000
Total Assets $4,243,000,000
Intangible Assets $1,265,000,000
Total Liabilities $2,168,000,000
Outstanding Shares 213,600,000

Earnings Per Share

2015 (estimate) $3.17
2014 $3.06
2013 $2.75
2012 $2.37
2011 $2.60
2010 $2.01
2009 $1.91
2008 $1.90
2007 $1.68
2006 $1.39
2005 $1.34

Earnings Per Share – ModernGraham

2015 (estimate) $2.91
2014 $2.71
2013 $2.46
2012 $2.27
2011 $2.15
2010 $1.88

Dividend History

Conclusion:

Brown-Forman is suitable for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor is concerned by the high PEmg and PB ratios, while the Enterprising Investor has no initial concerns.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel very comfortable proceeding with further research and comparing the company to other opportunities.  From a valuation side of things, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $2.15 in 2011 to only an estimated $2.91 for 2015.  This level of demonstrated growth does not support the market’s implied estimate of 10.61% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value below the price.

Be sure to check out previous ModernGraham valuations of Brown-Forman Corporation (BF.B) for greater perspective!

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Brown-Forman Corporation (BF.B)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in Brown-Forman Corporation (BF.B) or in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Constellation Brands Inc Valuation – March 2019 #STZ

Company Profile (excerpt from Reuters): Constellation Brands, Inc., incorporated on December 4, 1972, is an international beverage alcohol company. The Company is a producer and marketer of beer, wine and spirits with operations in the United States, Canada, Mexico, New Zealand and Italy. The Company’s segments include Beer, Wine and Spirits, and Corporate Operations and Other. The Company’s wine portfolio is complemented by select spirits brands and other select beverage alcohol products. It is a multi-category supplier (beer, wine and spirits) of beverage alcohol in the United States.

STZ Chart

STZ data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of STZ – March 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $31,587,195,102 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.08 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 514.04% Pass
6. Moderate PEmg Ratio PEmg < 20 16.86 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.81 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.08 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 42.79 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $9.84
MG Growth Estimate 15.00%
MG Value $378.81
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $142.67
MG Value based on 0% Growth $83.63
Market Implied Growth Rate 4.18%
Current Price $165.91
% of Intrinsic Value 43.80%

Constellation Brands, Inc. Class A does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, poor dividend history. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $4.88 in 2015 to an estimated $9.84 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 4.18% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Constellation Brands, Inc. Class A revealed the company was trading above its Graham Number of $110.32. The company pays a dividend of $2.08 per share, for a yield of 1.3% Its PEmg (price over earnings per share – ModernGraham) was 16.86, which was below the industry average of 22.75, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-65.35.

Constellation Brands, Inc. Class A receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$65.35
Graham Number $110.32
PEmg 16.86
Current Ratio 1.08
PB Ratio 2.81
Current Dividend $2.08
Dividend Yield 1.25%
Number of Consecutive Years of Dividend Growth 3

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 11/1/2018
Total Current Assets $3,638,500,000
Total Current Liabilities $3,363,400,000
Long-Term Debt $11,772,500,000
Total Assets $27,890,400,000
Intangible Assets $11,369,600,000
Total Liabilities $16,370,400,000
Shares Outstanding (Diluted Average) 194,820,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $12.86
Feb2018 $11.55
Feb2017 $7.52
Feb2016 $5.18
Feb2015 $4.17
Feb2014 $9.83
Feb2013 $2.04
Feb2012 $2.13
Feb2011 $2.62
Feb2010 $0.45
Feb2009 -$1.40
Feb2008 -$2.83
Feb2007 $1.38
Feb2006 $1.36
Feb2005 $1.19
Feb2004 $1.03
Feb2003 $1.10
Feb2002 $0.78
Feb2001 $0.65
Feb2000 $0.53
Feb1999 $0.34

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $9.84
Feb2018 $8.10
Feb2017 $6.17
Feb2016 $5.22
Feb2015 $4.88
Feb2014 $4.63
Feb2013 $1.74
Feb2012 $1.12
Feb2011 $0.43
Feb2010 -$0.51
Feb2009 -$0.68
Feb2008 -$0.08
Feb2007 $1.27
Feb2006 $1.17
Feb2005 $1.04
Feb2004 $0.91
Feb2003 $0.79

Recommended Reading:

Other ModernGraham posts about the company

5 Undervalued Companies for Value Investors with a Low Beta – January 2019
Constellation Brands Inc Valuation – May 2018 $STZ
Constellation Brands Inc Valuation – February 2017 $STZ
Constellation Brands Inc Valuation – August 2016 $STZ
19 Best Stocks For Value Investors This Week – 1/9/16

Other ModernGraham posts about related companies

Philip Morris International Inc Valuation – January 2019 $PM
Altria Group Inc Valuation – January 2019 $MO
Molson Coors Brewing Co Valuation – January 2019 $TAP
Boston Beer Company Inc Valuation – July 2018 $SAM
Constellation Brands Inc Valuation – May 2018 $STZ
Brown-Forman Corp Valuation – May 2018 $BF.B
Philip Morris International Inc Valuation – March 2018 $PM
Altria Group Inc Valuation – March 2018 $MO
Molson Coors Brewing Co Valuation – March 2018 $TAP
Molson Coors Brewing Co Valuation – Initial Coverage $TAP

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Philip Morris International Inc Valuation – January 2019 $PM

Company Profile (excerpt from Reuters): Philip Morris International Inc., incorporated on January 4, 2007, is a holding company. The Company is engaged in the manufacture and sale of cigarettes, other tobacco products and other nicotine-containing products in markets outside of the United States. Its portfolio consists of both international and local brands. The Company’s segments include European Union (EU); Eastern Europe, Middle East & Africa (EEMA); Asia, and Latin America & Canada. The Company’s portfolio of international and local brands is led by Marlboro. Its mid-price brands are L&M, Lark, Merit, Muratti and Philip Morris. Its other international brands include Bond Street, Chesterfield, Next and Red & White. The Company also owns various local cigarette brands, such as Dji Sam Soe, Sampoerna and U Mild in Indonesia; Champion, Fortune and Jackpot in the Philippines; Apollo-Soyuz and Optima in Russia; Morven Gold in Pakistan; Boston in Colombia; Belmont, Canadian Classics and Number 7 in Canada; f6 in Germany; Delicados in Mexico; Assos in Greece, and Petra in the Czech Republic and Slovakia. In addition to the manufacture and sale of cigarettes and other tobacco products, the Company is engaged in the development and commercialization of Reduced-Risk Products (RRPs). It has a range of RRPs in various stages of development, scientific assessment and commercialization.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of PM – January 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $108,832,228,560 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.19 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 11.16% Fail
6. Moderate PEmg Ratio PEmg < 20 15.57 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 -10.96 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.19 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 9.59 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $4.50
MG Growth Estimate -1.31%
MG Value $26.46
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $65.26
MG Value based on 0% Growth $38.26
Market Implied Growth Rate 3.53%
Current Price $70.06
% of Intrinsic Value 264.74%

Philip Morris International Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings growth over the last ten years, and the high PB ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $4.93 in 2014 to an estimated $4.5 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 3.53% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Philip Morris International Inc. revealed the company was trading above its Graham Number of $0. The company pays a dividend of $4.22 per share, for a yield of 6%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 15.57, which was below the industry average of 19.84, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-19.8.

Philip Morris International Inc. scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$19.80
Graham Number $0.00
PEmg 15.57
Current Ratio 1.19
PB Ratio -10.96
Current Dividend $4.22
Dividend Yield 6.02%
Number of Consecutive Years of Dividend Growth 10

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $18,538,000,000
Total Current Liabilities $15,599,000,000
Long-Term Debt $28,179,000,000
Total Assets $39,380,000,000
Intangible Assets $9,588,000,000
Total Liabilities $49,322,000,000
Shares Outstanding (Diluted Average) 1,555,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.99
Dec2017 $3.88
Dec2016 $4.48
Dec2015 $4.42
Dec2014 $4.76
Dec2013 $5.26
Dec2012 $5.17
Dec2011 $4.85
Dec2010 $3.92
Dec2009 $3.24
Dec2008 $3.31
Dec2007 $2.86
Dec2006 $2.91
Dec2005 $2.69
Dec2003 $1.95

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.50
Dec2017 $4.36
Dec2016 $4.67
Dec2015 $4.81
Dec2014 $4.93
Dec2013 $4.84
Dec2012 $4.45
Dec2011 $3.94
Dec2010 $3.41
Dec2009 $3.10
Dec2008 $2.94
Dec2007 $2.53
Dec2006 $2.08
Dec2005 $1.42
Dec2003 $0.65

Recommended Reading:

Other ModernGraham posts about the company

Philip Morris International Inc Valuation – March 2018 $PM
21 Companies in the Spotlight This Week – 5/9/15
Philip Morris International Annual Valuation – 2015 $PM
16 Companies in the Spotlight This Week – 4/26/14
Philip Morris International (PM) Annual Valuation – 2014

Other ModernGraham posts about related companies

Molson Coors Brewing Co Valuation – January 2019 $TAP
Boston Beer Company Inc Valuation – July 2018 $SAM
Constellation Brands Inc Valuation – May 2018 $STZ
Brown-Forman Corp Valuation – May 2018 $BF.B
Philip Morris International Inc Valuation – March 2018 $PM
Altria Group Inc Valuation – March 2018 $MO
Molson Coors Brewing Co Valuation – March 2018 $TAP
Molson Coors Brewing Co Valuation – Initial Coverage $TAP
Constellation Brands Inc Valuation – February 2017 $STZ
Brown-Forman Corporation – February 2017 $BF.B

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Altria Group Inc Valuation – January 2019 $MO

Company Profile (excerpt from Reuters): Altria Group, Inc., incorporated on August 27, 2009, is a holding company. The Company’s segments include smokeable products, smokeless products and wine. The Company’s subsidiaries include Philip Morris USA Inc. (PM USA), which is engaged in the manufacture and sale of cigarettes in the United States; John Middleton Co. (Middleton), which is engaged in the manufacture and sale of machine-made cigars and pipe tobacco, and UST LLC (UST), which, through its subsidiaries, including U.S. Smokeless Tobacco Company LLC (USSTC) and Ste. Michelle Wine Estates Ltd. (Ste. Michelle), is engaged in the manufacture and sale of smokeless tobacco products and wine. Its other operating companies include Nu Mark LLC (Nu Mark), a subsidiary that is engaged in the manufacture and sale of tobacco products, and Philip Morris Capital Corporation (PMCC), a subsidiary that maintains a portfolio of finance assets. Other subsidiaries include Altria Group Distribution Company, which provides sales, distribution and consumer engagement services to certain its operating subsidiaries, and Altria Client Services LLC, which provides various support services in areas, such as legal, regulatory, finance, human resources and external affairs, to the Company and its subsidiaries. The Company’s financial services business (conducted through PMCC) holds investments in finance leases, principally in transportation (including aircraft), power generation, real estate and manufacturing equipment.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of MO – January 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $90,682,708,546 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.60 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 227.13% Pass
6. Moderate PEmg Ratio PEmg < 20 10.25 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.86 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.60 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -3.42 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $4.71
MG Growth Estimate 15.00%
MG Value $181.28
Opinion Undervalued
MG Grade C
MG Value based on 3% Growth $68.28
MG Value based on 0% Growth $40.02
Market Implied Growth Rate 0.87%
Current Price $48.26
% of Intrinsic Value 26.62%

Altria Group Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PB ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.21 in 2014 to an estimated $4.71 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.87% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Altria Group Inc revealed the company was trading above its Graham Number of $26.74. The company pays a dividend of $2.54 per share, for a yield of 5.3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 10.25, which was below the industry average of 19.84, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-12.37.

Altria Group Inc receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$12.37
Graham Number $26.74
PEmg 10.25
Current Ratio 0.60
PB Ratio 5.86
Current Dividend $2.54
Dividend Yield 5.26%
Number of Consecutive Years of Dividend Growth 8

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $5,165,000,000
Total Current Liabilities $8,646,000,000
Long-Term Debt $11,896,000,000
Total Assets $43,953,000,000
Intangible Assets $17,692,000,000
Total Liabilities $28,457,000,000
Shares Outstanding (Diluted Average) 1,883,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.93
Dec2017 $5.31
Dec2016 $7.28
Dec2015 $2.67
Dec2014 $2.56
Dec2013 $2.26
Dec2012 $2.06
Dec2011 $1.64
Dec2010 $1.87
Dec2009 $1.54
Dec2008 $2.36
Dec2007 $4.62
Dec2006 $5.71
Dec2005 $4.99
Dec2004 $4.56
Dec2003 $4.52
Dec2002 $5.21
Dec2001 $3.87
Dec2000 $3.73
Dec1999 $3.19
Dec1998 $2.20

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.71
Dec2017 $4.74
Dec2016 $4.09
Dec2015 $2.41
Dec2014 $2.21
Dec2013 $1.98
Dec2012 $1.86
Dec2011 $1.98
Dec2010 $2.50
Dec2009 $3.16
Dec2008 $4.13
Dec2007 $4.97
Dec2006 $5.10
Dec2005 $4.74
Dec2004 $4.53
Dec2003 $4.38
Dec2002 $4.09

Recommended Reading:

Other ModernGraham posts about the company

Altria Group Inc Valuation – March 2018 $MO
Altria Group Inc Valuation – June 2016 $MO
5 Speculative and Overvalued Companies to Avoid – January 2015
Altria Group Inc. Annual Valuation – 2015 $MO
14 Companies in the Spotlight This Week – 1/25/14

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Molson Coors Brewing Co Valuation – January 2019 $TAP
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Philip Morris International Inc Valuation – March 2018 $PM
Altria Group Inc Valuation – March 2018 $MO
Molson Coors Brewing Co Valuation – March 2018 $TAP
Molson Coors Brewing Co Valuation – Initial Coverage $TAP
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Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Molson Coors Brewing Co Valuation – January 2019 $TAP

Company Profile (excerpt from Reuters): Molson Coors Brewing Company (MCBC), incorporated on August 14, 2003, is a holding company. The Company operates as a brewer. The Company’s segments include MillerCoors LLC (United States segment), operating in the United States; Molson Coors Canada (Canada segment), operating in Canada; Molson Coors Europe (Europe segment), operating in Bulgaria, Croatia, Czech Republic, Hungary, Montenegro, Republic of Ireland, Romania, Serbia, the United Kingdom and various other European countries; Molson Coors International (Molson Coors International segment), operating in various other countries, and Corporate. The Company offers a portfolio of owned and partner brands, including Carling, Coors Light, Miller Lite, Molson Canadian and Staropramen, as well as craft and specialty beers, such as the Blue Moon Brewing Company brands, the Jacob Leinenkugel Brewing Company brands, Creemore Springs, Cobra and Doom Bar.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of TAP – January 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $13,697,224,360 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.64 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 89.01% Pass
6. Moderate PEmg Ratio PEmg < 20 10.75 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.97 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.64 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -5.57 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $5.89
MG Growth Estimate 14.81%
MG Value $224.60
Opinion Undervalued
MG Grade A
MG Value based on 3% Growth $85.44
MG Value based on 0% Growth $50.09
Market Implied Growth Rate 1.12%
Current Price $63.34
% of Intrinsic Value 28.20%

Molson Coors Brewing Co Class B qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the low current ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.97 in 2014 to an estimated $5.89 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.12% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Molson Coors Brewing Co Class B revealed the company was trading below its Graham Number of $86.77. The company pays a dividend of $1.64 per share, for a yield of 2.6%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 10.75, which was below the industry average of 19.84, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-62.64.

Molson Coors Brewing Co Class B fares extremely well in the ModernGraham grading system, scoring an A.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$62.64
Graham Number $86.77
PEmg 10.75
Current Ratio 0.64
PB Ratio 0.97
Current Dividend $1.64
Dividend Yield 2.59%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $2,812,300,000
Total Current Liabilities $4,422,600,000
Long-Term Debt $8,970,300,000
Total Assets $30,470,300,000
Intangible Assets $22,329,400,000
Total Liabilities $16,380,300,000
Shares Outstanding (Diluted Average) 216,600,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.45
Dec2017 $6.53
Dec2016 $9.34
Dec2015 $2.12
Dec2014 $2.76
Dec2013 $3.08
Dec2012 $2.44
Dec2011 $3.63
Dec2010 $3.78
Dec2009 $3.87
Dec2008 $2.04
Dec2007 $2.71
Dec2006 $2.08
Dec2005 $0.84
Dec2004 $2.60
Dec2003 $2.39
Dec2002 $2.21
Dec2001 $1.66
Dec2000 $1.47
Dec1999 $1.23
Dec1998 $0.91

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.89
Dec2017 $5.66
Dec2016 $4.80
Dec2015 $2.63
Dec2014 $2.97
Dec2013 $3.17
Dec2012 $3.19
Dec2011 $3.44
Dec2010 $3.20
Dec2009 $2.71
Dec2008 $2.10
Dec2007 $2.13
Dec2006 $1.90
Dec2005 $1.85
Dec2004 $2.26
Dec2003 $1.99
Dec2002 $1.70

Recommended Reading:

Other ModernGraham posts about the company

10 Low PE Stock Picks for the Defensive Investor – June 2018
10 Undervalued Companies for the Defensive Investor – June 2018
10 Stocks for Using A Benjamin Graham Value Investing Strategy – May 2018
10 Low PE Stock Picks for the Defensive Investor – March 2018
5 Great Stocks This Week – 3/19/18

Other ModernGraham posts about related companies

Boston Beer Company Inc Valuation – July 2018 $SAM
Constellation Brands Inc Valuation – May 2018 $STZ
Brown-Forman Corp Valuation – May 2018 $BF.B
Philip Morris International Inc Valuation – March 2018 $PM
Altria Group Inc Valuation – March 2018 $MO
Molson Coors Brewing Co Valuation – March 2018 $TAP
Molson Coors Brewing Co Valuation – Initial Coverage $TAP
Constellation Brands Inc Valuation – February 2017 $STZ
Brown-Forman Corporation – February 2017 $BF.B
Boston Beer Company Inc Valuation – Initial Coverage $SAM

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

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