Writing on high-end distiller Remy Cointreau (REMYY) (RCO.PA) back in October of 2020, my takeaway was that this was a situation where I loved the products and liked the company, but wasn’t so fond of the valuation. Paying up for companies that can command durable price premiums for their products can work out to a point, but the valuation looked rich heading into the eventual pandemic recovery ramp.
The shares haven’t done poorly since then, and the ADRs are up about 20%, but that’s a lower return than the S&P 500 provided, as well as names like Diageo (DEO) and Pernod (PDRDY), both of which I liked better back at that time (you can read those articles here and here). What’s more, the shares still aren’t cheap and the company has made it clear that they are “build the business” mode and not “profit maximization” mode.
Again, I have no issues with the quality of the business. Indeed, I expect Remy to outgrow the sector, generating high single-digit long-term revenue growth and improving FCF margins, but it’s hard to see that as anything other than reflected in the share price today.
Read more here:
Remy Cointreau Making Smart Long-Term Moves, But Valuation Is An Issue
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