Quick Report on Ambev (ABEV)

Today we're going to take a closer look at large-cap Consumer Staples company Ambev, whose shares are currently trading at $3.18. 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!

Ambev Is Potentially Undervalued and Trades Below Its Graham Number:

Ambev S.A., through its subsidiaries, engages in the production, distribution, and sale of beer, draft beer, carbonated soft drinks, other non-alcoholic beverages, malt, and food products. 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, Ambev has a trailing 12 month P/E ratio of 15.9 and a P/B ratio of 0.59.

Ambev's PEG ratio is 2.57, 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.

Increasing Revenues but Narrowing Margins:

2019-12-31 2020-12-31 2021-12-31 2022-12-31
Revenue (MM) $52,600 $58,379 $72,854 $79,709
Gross Margins 58.8% 53.6% 51.0% 49.3%
Operating Margins 31.0% 24.7% 23.9% 22.3%
Net Margins 22.4% 19.49% 17.39% 18.14%
Net Income (MM) $11,780 $11,379 $12,671 $14,458
Net Interest Expense (MM) -1,218 -505 -1,253 -1,250
Net Interest Expense (MM) -$1,218 -$505 -$1,253 -$1,250
Depreciation & Amort. (MM) -$4,675 -$5,167 -$5,397 -$5,956
Earnings Per Share $0.74 $0.74 $0.82 $0.2
EPS Growth n/a 0.0% 10.81% -75.61%
Diluted Shares (MM) 15,869 15,868 15,858 15,748
Free Cash Flow (MM) $13,312 $14,163 $15,224 $14,109
Capital Expenditures (MM) -$5,069 -$4,693 -$7,677 -$6,533
Net Current Assets (MM) -$11,566 -$14,703 -$15,958 -$16,814
Current Ratio 1.1 1.06 0.99 0.93
Long Term Debt (MM) $2,410 $2,054 $2,253 $2,788
Net Debt / EBITDA -0.48 -0.65 -0.68 -0.53

Ambev has growing revenues and increasing reinvestment in the business and strong margins with a negative growth trend. Additionally, the company's financial statements display a steady stream of strong cash flows and low leverage. However, the firm suffers from slimmer gross margins than its peers and declining EPS growth.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.