Constellation Brands (STZ:NYS) Fundamental Valuation Report

Fundamental Valuation Report

Constellation Brands(STZ: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
$188.81 (USD) 09/11/2020

Weighted Valuation
$213.00 (USD)

Overall Rating
Undervalued by 12.8%

Valuation Models Comparables: $230.98 (USD)
(in order of importance) Adjusted Book Value: $227.27 (USD)
Multiples: $183.39 (USD)
Valuation Methods This company is:
Cash Flow: Overvalued on a Cash Flow Valuation
Comparable Company: Undervalued on a Comparable Valuation
Asset: Undervalued on an Asset Valuation
According to Analyst consensus at $213.00 this stock is Undervalued

Company Overview (STZ:NYS USD)

Price 188.81
Range 186.46 – 190.29
52 week 105.64 – 209.41
Open 188.79
Vol / Avg. 862896/941288
Mkt cap 36.47B
P/E 651.07
Div/yield 3.00/0.02
EPS -0.07
Shares 192.99M
Beta 0.97

Company Description

Constellation Brands is the largest multi-category alcohol supplier in the U.S. The business is anchored by a portfolio of Mexican beer trademarks, including Corona and Modelo, for which it acquired exclusive and perpetual U.S. ownership from AB InBev. The latter had to divest these rights due to antitrust mandates as it consummated its 2013 acquisition of dominant Mexican brewer, Grupo Modelo. Constellation’s wine/spirits business has been in flux, and it is currently divesting several lower-margin assets, including myriad wine brands and its Ballast Point craft beer brand. The firm imports most products after manufacturing them abroad, going to market through independent wholesalers. It owns 37% of Canopy Growth, a leading provider of medicinal and recreationally legal cannabis products.

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 STZ:NYS

Using a discounted cash flow model we generated an intrinsic value of $128.55 (USD) for STZ:NYS

Sensitivity Analysis

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

STZ:NYS Current Values Valuation If Dropped * Valuation If Raised *
Calculated Value: $128.55 1% 5% 1% 5%
WACC (or Ke) 6.99 $173.19 $98.87
Terminal Growth Rate 2.00 $101.39 $169.32
Tax Rate 0.27 $142.90 $114.19
Cash Flow 3,659,352,000 $115.69 $141.40
Capital Expenditures -893,820,000 $125.51 $131.58
Long Term Debt 8,029,000,000 $130.63 $126.47

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

Comparables Model

Using similar companies and price based ratios we generated a valuation of $423.71 (USD) for STZ:NYS. We also generated a valuation of $230.98 (USD) using other metrics and comparables.
The comparable companies were and Brown-Forman (BF.A:NYS).

Company STZ:NYS End Date Value
Earnings/Share $0.29 (USD)
Book Value/Share $57.34 (USD)
Sales/Share $42.76 (USD)
Cash Flow/Share $13.77 (USD)
EBITDA/Share ($0.99) (USD)
Price Based on Comps Adjustment Factor (%)
$10.43 (USD) 4.5
$918.09 (USD) -28.7
$441.25 (USD) 5.0
$574.47 (USD) -11.6
($31.03) (USD) 13.0
STZ:NYS Ratios Used Average Values BF.A:NYS
651.07 PE Ratio 35.98 35.98
3.29 PB Ratio 16.01 16.01
4.42 PS Ratio 10.32 10.32
13.71 PCF Ratio 46.53 46.53
360.46 EV to EBITDA 31.36 31.36

Multiples

Using a multiples approach we generated a valuation of  $183.39 (USD) for STZ:NYS

Company STZ:NYS End Date Value
Earnings/Share $0.29 (USD)
Book Value/Share $57.34 (USD)
Sales/Share $42.76 (USD)
Cash Flow/Share $13.77 (USD)
EBITDA/Share ($0.99) (USD)
Price Based on Comps Adjustment Factor
$7.11 (USD) 0
$237.98 (USD) 0
$209.66 (USD) 0
$278.81 (USD) 0
$0.00 (USD) 0
Ratios Ratio Average
PE Ratio 24.53
PB Ratio 4.15
PS Ratio 4.90
PCF Ratio 20.24
EV to EBITDA 16.73

Adjusted Book Value versus Historical Price to Book

The average the Price to Book ratio for  STZ:NYS for the last 10 years was  3.96

We ran the Adjusted Book Value for  STZ:NYS and generated a book value of  $57.39 (USD)
By multiplying these we get an adjusted valuation of  $227.27 (USD)

Analyst Data

In the Stockcalc database there are 3 analysts that provide a valuation for STZ:NYS. The 3 analysts have a concensus valuation for STZ:NYS for 2021 of $213.00 (USD).

STZ:NYS Constellation Brands

Analyst Recommendation
Buy Hold Sell Rating
(of 5)
Guidance As Of
5 0 0 4.8333 Buy 2020-9-10

Current Price: 188.81 USD

Analyst Consensus
USD Millions 2021 2022 2023
Mean EPS 8.87 10.17 4.42
# EPS Analysts 5 5 2
Mean Revenue 7,783.20 8,126.10 8,781.70
# Revenue Analysts 4 4 2
Mean Target Price 213.00
Mean Cash Flow 10.61 12.66 16.05
Mean EBITDA 2,595.90 3,128.80 3,587.60
Mean Net Income 1,735.00 1,988.20 2,275.90
Mean Debt Outstanding 10,576.70 10,535.50 10,064.10
Mean Tax Rate 18.00 18.00
Mean Growth Rate 7.70
Mean Capital Expenditure 564.60 574.60 572.20

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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