Brown-Forman (BF.A:NYS) Fundamental Valuation Report

Fundamental Valuation Report

Brown-Forman(BF.A:NYS)

Consumer Defensive:Beverages – Wineries & Distilleries

This Report was generated using the valuation tools available on StockCalc.com. For a free 30 day trial click here.

Close Price/Date
$73.21 (USD) 09/09/2020

Weighted Valuation
$64.77 (USD)

Overall Rating
Overvalued by 11.5%

Valuation Models Adjusted Book Value: $67.91 (USD)
Multiples: $60.06 (USD)
Valuation Methods This company is:
Cash Flow: Overvalued on a Cash Flow Valuation
Comparable Company: Overvalued on a Comparable Valuation
Asset: Overvalued on an Asset Valuation
According to Analyst consensus at $64.00 this stock is Overvalued

Company Overview (BF.A:NYS USD)

Price 73.21
Range 72.36 – 74.67
52 week 42.82 – 73.21
Open 72.36
Vol / Avg. 52287/43011
Mkt cap 37.48B
P/E 36.61
Div/yield 0.68/0.01
EPS 1.72
Shares 478.45M
Beta 0.78

Company Description

Brown-Forman is the largest U.S.-domiciled producer of distilled spirits. The firm reports only a single operating segment, and whiskey represents its primary business driver at over 75% of revenue, undergirded by the Jack Daniel’s brand as well as bourbons such as Woodford Reserve and Old Forrester. Notable nonwhiskey offerings include vodkas such as Finlandia and tequilas such as el Jimador and Herradura. The firm operates globally, with products sold in more than 170 countries, and adapts its route-to-consumer model depending on regulation as well as the prevailing competitive dynamics in a given market. For example, it sells through distributors in the U.S., but operates its own logistics apparatus in many other countries. The company remains under the control of the Brown family.

Valuation Details

 We have up to 6 valuation points for each company. Details are at the bottom of the report.

Discounted Cash Flow and Sensitivity Analysis for BF.A:NYS

Using a discounted cash flow model we generated an intrinsic value of $30.87 (USD) for BF.A:NYS

Sensitivity Analysis

(showing how changes in the input variables impact the DCF calculation)

BF.A:NYS Current Values Valuation If Dropped * Valuation If Raised *
Calculated Value: $30.87 1% 5% 1% 5%
WACC (or Ke) 5.99 $39.87 $24.88
Terminal Growth Rate 1.00 $25.37 $39.13
Tax Rate 0.18 $33.48 $28.26
Cash Flow 1,378,044,000 $28.58 $33.16
Capital Expenditures -115,800,000 $30.69 $31.05
Long Term Debt 2,241,000,000 $31.10 $30.64

* Changes are absolute: ex WACC from 8% to 7%

Comparables Model

Using similar companies and price based ratios we generated a valuation of $35.14 (USD) for BF.A:NYS. We also generated a valuation of $43.92 (USD) using other metrics and comparables.
The comparable companies were and Constellation Brands (STZ.B:NYS).

Company BF.A:NYS End Date Value
Earnings/Share $2.00 (USD)
Book Value/Share $4.49 (USD)
Sales/Share $6.97 (USD)
Cash Flow/Share $1.55 (USD)
EBITDA/Share $2.42 (USD)
Price Based on Comps Adjustment Factor (%)
$0.00 (USD) 28.4
$14.89 (USD) 0.0
$30.98 (USD) 77.9
$15.92 (USD) 66.0
$0.00 (USD) 33.3
BF.A:NYS Ratios Used Average Values STZ.B:NYS
36.61 PE Ratio 655.21 655.21
16.29 PB Ratio 3.31 3.31
10.50 PS Ratio 4.44 4.44
47.34 PCF Ratio 13.80 13.80
31.99 EV to EBITDA 361.88 361.88

Multiples

Using a multiples approach we generated a valuation of  $60.06 (USD) for BF.A:NYS

Company BF.A:NYS End Date Value
Earnings/Share $2.00 (USD)
Book Value/Share $4.49 (USD)
Sales/Share $6.97 (USD)
Cash Flow/Share $1.55 (USD)
EBITDA/Share $2.42 (USD)
Price Based on Comps Adjustment Factor
$65.71 (USD) 0
$69.02 (USD) 0
$52.01 (USD) 0
$57.23 (USD) 0
$56.34 (USD) 0
Ratios Ratio Average
PE Ratio 32.86
PB Ratio 15.36
PS Ratio 7.46
PCF Ratio 37.01
EV to EBITDA 23.24

Adjusted Book Value versus Historical Price to Book

The average the Price to Book ratio for  BF.A:NYS for the last 10 years was  15.11

We ran the Adjusted Book Value for  BF.A:NYS and generated a book value of  $4.50 (USD)
By multiplying these we get an adjusted valuation of  $67.91 (USD)

Analyst Data

In the Stockcalc database there are 2 analysts that provide a valuation for BF.A:NYS. The 2 analysts have a concensus valuation for BF.A:NYS for 2021 of $64.00 (USD).

BF.A:NYS Brown-Forman

Analyst Recommendation
Buy Hold Sell Rating
(of 5)
Guidance As Of
1 1 1 2.7500 Hold 2020-9-8

Current Price: 73.21 USD

Analyst Consensus
USD Millions 2021 2022 2023
Mean EPS 1.77 1.88 2.00
# EPS Analysts 3 2 1
Mean Revenue 3,408.20 3,620.90 3,713.90
# Revenue Analysts 3 2 1
Mean Target Price 64.00
Mean Cash Flow 1.83 2.00 2.21
Mean EBITDA 1,280.00 1,289.80 1,364.40
Mean Net Income 896.50 896.40 950.20
Mean Debt Outstanding
Mean Tax Rate
Mean Growth Rate 9.27
Mean Capital Expenditure 112.10 117.80 111.40

Explanation of Valuation Models

We have up to 6 valuation points for each company in the database.

The Discounted Cash Flow (DCF) valuation is a cash flow model where cash flow projections are discounted back to the present to calculate value per share. DCF is a common valuation technique especially for companies undergoing irregular cash flows such as resource companies (mining, forestry, oil and gas) going though price cycles or smaller companies about to generate cash flow (junior exploration companies, junior pharma, technology firms…).

The Price Comparables valuation is the result of valuing the company we are looking at on the basis of ratios from selected comparable companies: Price to Earnings, Price to Book, Price to Sales, Price to Cash Flow, Enterprise Value (EV) to EBITDA. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

We have included the Other Comparables as a way to value companies that cannot be valued using Earnings based ratios. This technique is very useful for companies still experiencing negative cash flows such as mining exploration firms. We use Cash/Share, Book Value/Share, MarketCap, 1 Year Return, NetPPE as the ratios here. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

Multiples are similar to Price comparables where we look at current or historic ratios for the company in question to assess what it should be worth today based on those historic ratios. We use the same 5 ratios as in the price comparables and value the company with its historic averages.

With Adjusted Book Value (ABV) we calculate the book value per share for the company based on its balance sheet and multiply that book value per share by its historical price to book ratio to calculate a value per share.

If we have Analyst coverage for the company we use the consensus target price here.

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