As of July 19, 2023, Constellation Brands Inc (STZ, Financial) is trading at $267.93, marking a 5.35% change for the day. With a market cap of $49.1 billion and sales of $9.6 billion, the company's financial metrics are noteworthy. According to the GuruFocus Value Line, the GF Value of Constellation Brands is $262.36, indicating that the stock is fairly valued.
Constellation Brands is a leading provider of alcoholic beverages in the U.S., offering an array of products across beer, wine, and spirits categories. The company generates 80% of its revenue from Mexican beer imports, including popular brands like Modelo and Corona. In addition, Constellation Brands holds a 36% stake in Canopy Growth, a Canadian leader in medicinal and recreational cannabis products, and operates a 50/50 joint venture with glass manufacturer Owens-Illinois in Mexico.
GF Value Analysis
The GF Value is a unique indicator of a stock's intrinsic worth, calculated from historical trading multiples, an adjustment factor from GuruFocus based on past performance and growth, and estimates of future business performance. Given Constellation Brands' current price and market cap, the stock appears to be fairly valued. As such, the long-term return of its stock is likely to be close to the rate of its business growth.
Financial Strength and Profitability
Financial strength is a critical factor in avoiding capital loss. A company's cash-to-debt ratio and interest coverage provide insights into its financial strength. Constellation Brands has a cash-to-debt ratio of 0.02, ranking below 95.17% of companies in the Beverages - Alcoholic industry, indicating poor financial strength.
Profitability, especially consistent profitability over the long term, reduces investment risk. Constellation Brands has been profitable for 7 out of the past 10 years, with an operating margin of 29.06%, ranking above 90.87% of companies in the industry, indicating fair profitability.
Growth and ROIC vs WACC
Growth is a vital factor in company valuation. Unfortunately, the 3-year average annual revenue growth rate of Constellation Brands is 4.1%, ranking below 56.35% of companies in the Beverages - Alcoholic industry. Similarly, the 3-year average EBITDA growth rate is 0%, ranking below all companies in the industry.
Comparing a company's return on invested capital (ROIC) and the weighted cost of capital (WACC) provides another perspective on profitability. For the past 12 months, Constellation Brands' ROIC is -40.74, and its WACC is 6.73, indicating challenges in generating cash flow relative to the capital invested in the business.
Conclusion
In conclusion, Constellation Brands (STZ, Financial) appears to be fairly valued. The company's financial condition is poor, and its profitability is fair. Its growth ranks below the majority of companies in the Beverages - Alcoholic industry. For more detailed information about Constellation Brands stock, check out its 30-Year Financials here.
For high-quality companies that may deliver above-average returns, check out the GuruFocus High Quality Low Capex Screener.
