Brown-Forman: Near 52-Week Low, But Not Cheap Enough
Summary
Brown-Forman is a high-quality spirits business targeting mid-single-digits sales growth and high-single-digit EBIT growth.
Its track record was consistent before COVID-19, but margins have fallen, in part due to a focus on investments and the long term.
Shares have a 35.9x P/E, a 2.6% Free Cash Flow Yield and a 1.3% Dividend Yield, more expensive than global peers.
Growth may exceed high-single-digits if its international expansion and/or Coca-Cola partnership succeed beyond expectations.
With Class B shares at $62.43, on balance we see Brown-Forman as too expensive and wait for a better entry point. Avoid for now.
Introduction
We review Brown-Forman as its Class B shares continue to hover just above their 52-week low, having lost another 6% since the release of Q3 FY23 results on March 8.
Brown-Forman is a unique asset and management has a long-term growth algorithm of mid-single-digits sales growth and high-single-digits EBIT growth. Mid-single-digit sales growth has been remarkabl…