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.