DCF Studio

    STZ · NYQ · Consumer Defensive

    Constellation Brands, Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 151.22

    Market price

    USD 118.97

    Implied upside

    +27.1%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    AdjustedCapital expenditure runs at 11.3% of revenue against depreciation of 4.3%. A perpetuity has to be a steady state, so the terminal year uses maintenance capex at depreciation and then charges the reinvestment terminal growth requires (g/ROIC of NOPAT). The bridge is shown under Terminal Value.

    Value Per Share

    Perpetuity growth
    USD 151.22+27.1%
    Exit multiple
    USD 102.86-13.5%
    Market price
    USD 118.97

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn1bn2bnFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayUSD
    LineFY27FY28FY29FY30FY31CAGR
    RevenueUSD 9.0bnUSD 8.9bnUSD 8.8bnUSD 8.7bnUSD 8.6bn-1.1%
    EBITUSD 2.9bnUSD 2.8bnUSD 2.8bnUSD 2.8bnUSD 2.7bn-1.1%
    NOPATUSD 2.3bnUSD 2.2bnUSD 2.2bnUSD 2.2bnUSD 2.2bn-1.1%
    Add depreciation & amortisationUSD 390.9mUSD 386.5mUSD 382.2mUSD 377.9mUSD 373.7m-1.1%
    Less capital expenditureUSD -1.0bnUSD -1.0bnUSD -997.6mUSD -986.4mUSD -975.4m-1.1%
    Less increase in working capitalUSD 55.6mUSD 54.9mUSD 54.3mUSD 53.7mUSD 53.1m+1.1%
    Free cashflow to firmUSD 1.7bnUSD 1.7bnUSD 1.6bnUSD 1.6bnUSD 1.6bn-1.1%
    Discount factor0.96790.90670.84940.79580.7455-
    Present valueUSD 1.6bnUSD 1.5bnUSD 1.4bnUSD 1.3bnUSD 1.2bn-7.4%
    Present Value Of The ForecastUSD 7.0bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.598Reported 0.400, pulled toward 1.0 (Blume)
    Cost of equity8.29%Risk-free + beta x equity risk premium
    Cost of debt5.00%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationUSD 20.3bn64.5% of capital
    Total debtUSD 11.2bn35.5% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC6.75%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 151.22

    81% of EV

    Forecast FCFF, final year
    USD 1.6bn
    Capex at depreciation, working capital in reinvestment
    USD 2.2bn
    Less reinvestment at g/ROIC (21.0% of NOPAT)
    USD -453.5m
    Capitalised
    USD 1.7bn
    ROIC (reported)
    11.9%
    Terminal value, undiscounted
    USD 41.1bn
    Terminal value, discounted
    USD 30.6bn
    Enterprise value
    USD 37.6bn
    Less net debt
    USD 11.1bn
    Equity value
    USD 26.5bn

    Exit at 9.6x EBITDA

    Value per shareUSD 102.86

    76% of EV

    Terminal value, undiscounted
    USD 29.7bn
    Terminal value, discounted
    USD 22.1bn
    Enterprise value
    USD 29.2bn
    Less net debt
    USD 11.1bn
    Equity value
    USD 18.1bn

    Spread between methods: 38%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    4.75%250.89286.49337.77418.18562.83
    5.75%177.10193.90215.75245.42288.12
    6.75%131.49140.35151.22164.89182.64
    7.75%100.51105.46111.29118.28126.82
    8.75%78.1180.9384.1587.8892.24

    Outlined: this model. Green text: above today's price of 118.97. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year-1.1%-5.1%-4.0pp
    EBIT margin31.6%27.1%-4.5pp
    Discount rate6.7%7.5%+0.8pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.