Today we're going to take a closer look at large-cap Consumer Staples company Constellation Brands, whose shares are currently trading at $246.63. We've been asking ourselves whether the company is under or over valued at today's prices... let's perform a brief value analysis to find out!
Constellation Brands's P/B and P/E Ratios Are Higher Than Average:
Constellation Brands, Inc., together with its subsidiaries, produces, imports, markets, and sells beer, wine, and spirits in the United States, Canada, Mexico, New Zealand, and Italy. The company belongs to the Consumer Staples sector, which has an average price to earnings (P/E) ratio of 24.36 and an average price to book (P/B) ratio of 4.29. In contrast, Constellation Brands has a trailing 12 month P/E ratio of -2466.3 and a P/B ratio of 5.37.
Constellation Brands's PEG ratio is 2.1, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.
Exceptional Profitability Overshadowed by Excessive Leverage:
| 2020-02-29 | 2021-02-28 | 2022-02-28 | 2023-02-28 | |
|---|---|---|---|---|
| Revenue (MM) | $8,344 | $8,615 | $8,821 | $9,453 |
| Gross Margins | 49.8% | 51.8% | 53.4% | 50.4% |
| Operating Margins | 30.3% | 32.5% | 34.0% | 30.1% |
| Net Margins | -0.14% | 23.19% | -0.46% | -0.75% |
| Net Income (MM) | -$12 | $1,998 | -$40 | -$71 |
| Net Interest Expense (MM) | -429 | -386 | -356 | -399 |
| Net Interest Expense (MM) | -$429 | -$386 | -$356 | -$399 |
| Depreciation & Amort. (MM) | -$326 | -$294 | -$337 | -$384 |
| Earnings Per Share | -$0.07 | $10.23 | -$0.22 | -$0.1 |
| EPS Growth | n/a | 14714.29% | -102.15% | 54.55% |
| Diluted Shares (MM) | 192 | 219 | 191 | 2 |
| Free Cash Flow (MM) | $1,825 | $1,942 | $1,679 | $1,722 |
| Capital Expenditures (MM) | -$726 | -$865 | -$1,027 | -$1,035 |
| Net Current Assets (MM) | -$11,365 | -$10,131 | -$10,478 | -$12,432 |
| Current Ratio | 1.51 | 2.4 | 1.23 | 1.18 |
| Long Term Debt (MM) | $11,211 | $10,413 | $9,488 | $11,286 |
| Net Debt / EBITDA | -54.23 | 3.13 | 10.61 | 10.87 |
Constellation Brands has growing revenues and increasing reinvestment in the business, strong margins with a stable trend, and a steady stream of strong cash flows. However, Constellation Brands has slimmer gross margins than its peers, declining EPS growth, and a highly leveraged balance sheet. Finally, we note that Constellation Brands has just enough current assets to cover current liabilities.
