Alcohol & Tobacco Stocks

Molson Coors Brewing Co Valuation – March 2018 $TAP

Company Profile (obtained from Marketwatch): Molson Coors Brewing Co. produces and sells beer. It brews, markets and sells a portfolio of brands such as Coors Light, Molson Canadian, Carling, Blue Moon and Keystone Light across the Americas, Europe and Asia. It operates through the following segments: the United States, Canada, Europe, and Molson Coors International (MCI). It operates in Canada through Molson Coors Canada, in the United States through MillerCoors LLC, in Europe through Molson Coors Europe and Molson Coors International operating in various other countries. It also markets and sells its brands, which include Coors, Coors 1873, Coors Extra, Coors Gold, Iceberg 9000, King Cobra, Royal Brew, and Zima. in various international markets. The company was founded in 1873 and is headquartered in Denver, CO.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of TAP – March 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 $17,523,092,388 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 85.46% Pass
6. Moderate PEmg Ratio PEmg < 20 14.06 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.33 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 -8.76 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 $5.76
MG Growth Estimate 14.13%
MG Value $211.75
Opinion Undervalued
MG Grade A
MG Value based on 3% Growth $83.51
MG Value based on 0% Growth $48.95
Market Implied Growth Rate 2.78%
Current Price $80.96
% of Intrinsic Value 38.23%

Molson Coors Brewing Co 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 $5.76 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.78% 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 revealed the company was trading below its Graham Number of $83.53. The company pays a dividend of $1.64 per share, for a yield of 2% Its PEmg (price over earnings per share – ModernGraham) was 14.06, which was below the industry average of 25.91, 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 $-68.5.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$68.50
Graham Number $83.53
PEmg 14.06
Current Ratio 0.64
PB Ratio 1.33
Current Dividend $1.64
Dividend Yield 2.03%
Number of Consecutive Years of Dividend Growth 0

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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Total Current Assets $2,189,700,000
Total Current Liabilities $3,399,300,000
Long-Term Debt $10,598,700,000
Total Assets $30,246,900,000
Intangible Assets $22,702,000,000
Total Liabilities $17,020,800,000
Shares Outstanding (Diluted Average) 216,500,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.05
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 $5.76
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

5 Best Stocks for Value Investors This Week – 2/25/17
Molson Coors Brewing Co Valuation – Initial Coverage $TAP
5 Speculative and Overvalued Companies to Avoid – November 2015
Molson Coors Brewing Co. Valuation – November 2015 Update $TAP
30 Companies in the Spotlight This Week – 11/15/14

Other ModernGraham posts about related companies

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
Altria Group Inc Valuation – June 2016 $MO
Constellation Brands Inc Valuation – January 2016 Update $STZ
Molson Coors Brewing Co. Valuation – November 2015 Update $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.

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