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How Does Constellation Brands Compare to Its Peers on Valuation?

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Nov. 20 2020, Updated 4:15 p.m. ET

12-month forward PE ratio

Constellation Brands (STZ) was trading at a 12-month forward PE (price-to-earnings) ratio of 23.9x on June 20. The company’s forward PE ratio has fallen 4.4% in 2016. The stock is currently trading below its year-to-date average 12-month forward PE ratio of 24.5x. A forward PE ratio tells us how much an investor is willing to pay for the company’s next four quarters of earnings.

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Valuation of peers

For fiscal 2017, analysts expect Constellation Brands’ sales and adjusted EPS (earnings per share) to grow by 11.2% and 16%, respectively. Constellation Brands is trading at a lower valuation multiple compared to its alcoholic beverage peers. On June 20, Anheuser-Busch InBev (BUD), Molson Coors Brewing Company (TAP), and Brown-Forman (BF.B) were trading at forward PE ratios of 29.9x, 27.1x, and 27.6x, respectively. Constellation Brands looks undervalued at its current valuation multiple, given the strong sales and earnings expectations compared to those of its peers.

For the current fiscal year, the largest beer producer, Anheuser-Busch InBev, is expected to report flat sales and a decline of 19.4% in its adjusted EPS. Analysts expect Molson Coors Brewing Company to see sales and adjusted EPS fall 1.4% and 12%, respectively, in fiscal 2016.

Analysts expect Brown-Forman’s fiscal 2017 sales to remain flat and adjusted EPS to rise by 2.6% compared to the previous year.

ETF exposure

You can gain exposure to Constellation Brands through several ETFs. The PowerShares Dynamic Food & Beverage Portfolio (PBJ) has 4.9% exposure to Constellation Brands. Further, Constellation Brands constitutes 4.6% of the PowerShares DWA Consumer Staples Momentum Portfolio (PSL). The First Trust Consumer Staples AlphaDEX Fund (FXG) has 2.5% exposure to Constellation Brands.

For more updates on this sector, visit our Alcoholic Beverages page.

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