It takes a crisis to prove out a strategy, and thus far through the pandemic, Brown-Forman’s (BF.B) brand-building capabilities have served the company well. While different reporting calendars due create some challenges with comparability, Brown-Forman’s underlying sales performance has been a clear standout in a sector where many companies reported 30%-plus declines.
Valuation is the main issue I see, as “stretched” doesn’t really do it justice and Brown-Forman almost makes Remy Cointreau (OTCPK:REMYY) look reasonably valued. While Brown-Forman does have excellent margins and ROICs (both of which contribute to a justifiable peer premium), I don’t see enough here in terms of growth or further margin leverage to support this premium.
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