Gauging Constellation Brands’ Valuation before Fiscal 2Q18
Forward valuation multiple
As of September 28, 2017, Constellation Brands (STZ) was trading at a 12-month forward PE (price-to-earnings) ratio of 24.1x. Its valuation multiple has risen 3.5% since the announcement of its fiscal 1Q18 results in June 2017.
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Comparison with peers
As of September 28, 2017, Constellation Brands’ alcoholic beverage peers Anheuser-Busch InBev (BUD), Molson Coors (TAP), and Brown-Forman (BF.B) were trading at 12-month forward PE ratios of 27.3x, 17.8x, and 28.3x, respectively.
With the exception of Molson Coors, Constellation Brands and its peers are trading at higher valuation multiples than the S&P 500 Index with a forward PE ratio of 18.1x.
A 12-month forward PE is computed by dividing a company’s current stock price by an estimate of its EPS (earnings per share) over the next four quarters. It differs among companies based on factors such as growth expectations, risk-return profile, and leverage.
Currently, analysts expect Constellation Brands’ sales to rise 3.8% to $7.6 billion in fiscal 2018, which ends on February 28, 2018. Its EPS, excluding one-time items, is expected to rise an impressive 21.0% to $8.18 in fiscal 2018. Continued demand for the company’s imported beer brands and its premiumization strategy are expected to drive its performance in fiscal 2018.
The company is also aggressively managing its costs to improve its margins and mitigate the impact of unfavorable commodity prices and currency headwinds.
We’ll look at analysts’ recommendations for Constellation Brands stock in the next part of this series.