As of July 19, 2023, the stock of Constellation Brands Inc (STZ, Financial) is trading at $267.93, reflecting a 5.35% change for the day. With a market cap of $49.1 billion, the company seems fairly valued according to the GuruFocus Value at $262.36. This assessment is based on the company's historical trading multiples, past performance, and future business growth estimates.
Constellation Brands is the leading provider of alcoholic beverages across beer, wine, and spirits categories in the U.S., contributing 80% of its revenue from Mexican beer imports under popular brands like Modelo and Corona. The remaining revenue is generated from select wine and spirits brands. Besides, Constellation Brands owns a 36% stake in no-moat Canopy Growth, a leader in medicinal and recreational cannabis products in Canada, and has a 50/50 joint venture with glass manufacturer Owens-Illinois in Mexico.
GF Value of Constellation Brands (STZ, Financial)
Given that the stock of Constellation Brands (STZ) is fairly valued, the long-term return of its stock is expected to align with the rate of its business growth. The GF Value Line, which represents the fair value at which the stock should ideally be traded, suggests that the current stock price is not significantly above or below the fair value.
Financial Strength of Constellation Brands
Before investing in a company, it's crucial to assess its financial strength. Companies with poor financial strength pose a higher risk of permanent loss. Constellation Brands' cash-to-debt ratio of 0.02 is lower than 95.17% of companies in the Beverages - Alcoholic industry, indicating poor financial strength.
Profitability of Constellation Brands
Investing in profitable companies is less risky, especially those with consistent profitability over the long term. Constellation Brands has been profitable for 7 out of the past 10 years. With operating margins of 29.06%, the company outperforms 90.87% of companies in the Beverages - Alcoholic industry. However, the company had an EPS of $-1.83 over the past 12 months.
Growth Prospects of Constellation Brands
Growth is a critical factor in a company's valuation. Constellation Brands' 3-year average annual revenue growth rate is 4.1%, which is lower than 56.35% of companies in the Beverages - Alcoholic industry. Its 3-year average EBITDA growth rate is 0%, which ranks lower than all companies in the industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) and the weighted cost of capital (WACC) provides insights into its profitability. For Constellation Brands, the ROIC is -40.74, and the WACC is 6.73, indicating a negative return on invested capital over the past 12 months.
Conclusion
In summary, the stock of Constellation Brands (STZ, Financial) appears to be fairly valued. The company's financial condition is weak, and its profitability is moderate. Its growth ranks lower than all companies in the Beverages - Alcoholic industry. To learn more about Constellation Brands stock, you can check out its 30-Year Financials here.
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