Alcohol & Tobacco Stocks

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

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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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