Brown-Forman Corporation manufactures, bottles, imports, exports, markets, and sells various alcoholic beverages worldwide. It provides spirits, wines, ready-to-drink cocktails, whiskey, vodka, tequilas, champagnes, wines, brandy, and liqueur. The company was founded in 1870 and is based in Louisville, Kentucky.
BF.B Price Forecast Based on DCF Valuation
DCF Fair Value Target:
We started the process of determining a valid price forecast for Brown Forman Corp with a discounted cash flow analysis -- the results of which can be found in the table below. To summarize, we found that Brown Forman Corp ranked in the 16th percentile in terms of potential gain offered. Our DCF analysis suggests the stock is overvalued by about 77.5%. The most interesting components of our discounted cash flow analysis for Brown Forman Corp ended up being:
The company's debt burden, as measured by earnings divided by interest payments, is 15.16 -- which is good for besting 82.94% of its peer stocks (US stocks in the Consumer Defensive sector with positive cash flow).
The business' balance sheet suggests that 7% of the company's capital is sourced from debt; this is greater than merely 17.38% of the free cash flow producing stocks we're observing.
BF.B's estimated cost of debt, based largely on its market capitalization and its interest coverage ratio, is 2%; for context, that number is higher than 41.69% of tickers in our DCF set.
Terminal Growth Rate in Free Cash Flow
Return Relative to Current Share Price
SAM, PEP, LWAY, CVGW, and EL can be thought of as valuation peers to BF.B, in the sense that they are in the Consumer Defensive sector and have a similar price forecast based on DCF valuation.
I predict that retail sales, as well as those from bars and restaurants, will accelerate after our quadrennial presidential campaign is over. In politics, one side will win, one side will lose. But no matter the outcome, the alcoholic beverage industry wins perennially over something so transitory as "four more...
Joseph L. Shaefer on Seeking Alpha | September 28, 2020