Stock Analysis on Net
Stock Analysis on Net

Constellation Brands Inc. (NYSE:STZ)

This company has been moved to the archive! The financial data has not been updated since January 5, 2023.

Present Value of Free Cash Flow to Equity (FCFE)

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In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Free cash flow to equity (FCFE) is generally described as cash flows available to the equity holder after payments to debt holders and after allowing for expenditures to maintain the company asset base.

Intrinsic Stock Value (Valuation Summary)

Constellation Brands Inc., free cash flow to equity (FCFE) forecast

US$ in thousands, except per share data

Microsoft Excel
Year Value FCFEt or Terminal value (TVt) Calculation Present value at 14.75%
01 FCFE0 1,597,300
1 FCFE1 1,789,355 = 1,597,300 × (1 + 12.02%) 1,559,413
2 FCFE2 1,996,236 = 1,789,355 × (1 + 11.56%) 1,516,146
3 FCFE3 2,217,813 = 1,996,236 × (1 + 11.10%) 1,467,975
4 FCFE4 2,453,741 = 2,217,813 × (1 + 10.64%) 1,415,425
5 FCFE5 2,703,430 = 2,453,741 × (1 + 10.18%) 1,359,058
5 Terminal value (TV5) 65,181,687 = 2,703,430 × (1 + 10.18%) ÷ (14.75% – 10.18%) 32,767,890
Intrinsic value of Constellation Brands Inc. common stock 40,085,907
 
Intrinsic value of Constellation Brands Inc. common stock (per share) $217.21
Current share price $208.68

Based on: 10-K (reporting date: 2022-02-28).

1 See details »

Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.

Required Rate of Return (r)

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Assumptions
Rate of return on LT Treasury Composite1 RF 4.86%
Expected rate of return on market portfolio2 E(RM) 13.52%
Systematic risk of Constellation Brands Inc. common stock βSTZ 1.14
 
Required rate of return on Constellation Brands Inc. common stock3 rSTZ 14.75%

1 Unweighted average of bid yields on all outstanding fixed-coupon U.S. Treasury bonds neither due or callable in less than 10 years (risk-free rate of return proxy).

2 See details »

3 rSTZ = RF + βSTZ [E(RM) – RF]
= 4.86% + 1.14 [13.52% – 4.86%]
= 14.75%

FCFE Growth Rate (g)

FCFE growth rate (g) implied by PRAT model

Constellation Brands Inc., PRAT model

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Average Feb 28, 2022 Feb 28, 2021 Feb 29, 2020 Feb 28, 2019 Feb 28, 2018 Feb 28, 2017
Selected Financial Data (US$ in thousands)
Dividends declared 572,000 575,500 569,100 558,900 400,700 315,600
Net income (loss) attributable to CBI (40,400) 1,998,000 (11,800) 3,435,900 2,318,900 1,535,100
Net sales 8,820,700 8,614,900 8,343,500 8,116,000 7,585,000 7,331,500
Total assets 25,855,800 27,104,800 27,323,200 29,231,500 20,538,700 18,602,400
Total CBI stockholders’ equity 11,731,900 13,598,900 12,131,800 12,551,000 8,046,100 6,891,200
Financial Ratios
Retention rate1 — 0.71 — 0.84 0.83 0.79
Profit margin2 -0.46% 23.19% -0.14% 42.33% 30.57% 20.94%
Asset turnover3 0.34 0.32 0.31 0.28 0.37 0.39
Financial leverage4 2.20 1.99 2.25 2.33 2.55 2.70
Averages
Retention rate 0.79
Profit margin 19.41%
Asset turnover 0.33
Financial leverage 2.34
 
FCFE growth rate (g)5 12.02%

Based on: 10-K (reporting date: 2022-02-28), 10-K (reporting date: 2021-02-28), 10-K (reporting date: 2020-02-29), 10-K (reporting date: 2019-02-28), 10-K (reporting date: 2018-02-28), 10-K (reporting date: 2017-02-28).

2022 Calculations

1 Retention rate = (Net income (loss) attributable to CBI – Dividends declared) ÷ Net income (loss) attributable to CBI
= (-40,400 – 572,000) ÷ -40,400
= —

2 Profit margin = 100 × Net income (loss) attributable to CBI ÷ Net sales
= 100 × -40,400 ÷ 8,820,700
= -0.46%

3 Asset turnover = Net sales ÷ Total assets
= 8,820,700 ÷ 25,855,800
= 0.34

4 Financial leverage = Total assets ÷ Total CBI stockholders’ equity
= 25,855,800 ÷ 11,731,900
= 2.20

5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= 0.79 × 19.41% × 0.33 × 2.34
= 12.02%

FCFE growth rate (g) implied by single-stage model

g = 100 × (Equity market value0 × r – FCFE0) ÷ (Equity market value0 + FCFE0)
= 100 × (38,512,083 × 14.75% – 1,597,300) ÷ (38,512,083 + 1,597,300)
= 10.18%

where:
Equity market value0 = current market value of Constellation Brands Inc. common stock (US$ in thousands)
FCFE0 = the last year Constellation Brands Inc. free cash flow to equity (US$ in thousands)
r = required rate of return on Constellation Brands Inc. common stock

FCFE growth rate (g) forecast

Constellation Brands Inc., H-model

Microsoft Excel
Year Value gt
1 g1 12.02%
2 g2 11.56%
3 g3 11.10%
4 g4 10.64%
5 and thereafter g5 10.18%

where:
g1 is implied by PRAT model
g5 is implied by single-stage model
g2, g3 and g4 are calculated using linear interpoltion between g1 and g5

Calculations

g2 = g1 + (g5 – g1) × (2 – 1) ÷ (5 – 1)
= 12.02% + (10.18% – 12.02%) × (2 – 1) ÷ (5 – 1)
= 11.56%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= 12.02% + (10.18% – 12.02%) × (3 – 1) ÷ (5 – 1)
= 11.10%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= 12.02% + (10.18% – 12.02%) × (4 – 1) ÷ (5 – 1)
= 10.64%