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Brown-Forman: Near 52-Week Low, But Not Cheap Enough

Librarian Capital profile picture
Librarian Capital


  • Brown-Forman is a high-quality spirits business targeting mid-single-digits sales growth and high-single-digit EBIT growth.
  • Its track record was consistent before COVID-19, but margins have fallen, in part due to a focus on investments and the long term.
  • Shares have a 35.9x P/E, a 2.6% Free Cash Flow Yield and a 1.3% Dividend Yield, more expensive than global peers.
  • Growth may exceed high-single-digits if its international expansion and/or Coca-Cola partnership succeed beyond expectations.
  • With Class B shares at $62.43, on balance we see Brown-Forman as too expensive and wait for a better entry point. Avoid for now.
Jack Daniels & New York Magazine Celebrate Jack Daniels" Sinatra Select

Stephen Lovekin


We review Brown-Forman Corporation (NYSE:BF.B) as its Class B shares continue to hover just above their 52-week low, having lost another 6% since the release of Q3 FY23 results on March 8.

Brown-Forman Class B Share Price (Last 1 Year)

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Librarian Capital profile picture
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Comments (14)

Having read through the proxy (June 24, 2022), I point you to this passage...

Page 42 - "Brown-Forman delivered 13% growth in underlying net sales and 15% growth in underlying operating income in fiscal 2022. Our growth trailed that of our industry peers who delivered 21% growth in underlying net sales and 31% growth in underlying operating income during the same performance period. Brown-Forman outperformed its industry peers in fiscal 2020 and fiscal 2021. This created a higher base of comparison against our industry peers during fiscal 2022. The Committee considered both our strong absolute results and our below-median relative performance and decided to amend the relative performance comparison from focusing solely on fiscal 2022 to focusing on our three-year compound annual growth results relative to peers over fiscal 2020, fiscal 2021, and fiscal 2022. This amendment from a one-year relative performance comparison to a three-year relative performance comparison moved the incentive payout from 0% to 77% for all plan participants, including our NEOs, ensuring that absolute performance was recognized and rewarded during a period of significant uncertainty."

It's infuriating to read when boards amend performance goals so everyone gets paid!!
As an consumer and investor of BF I see a nice expansion of brands. The JD product line has grown substantially while the Woodford Reserve and Old Forster brands are maintaining. The JD brand expansion is moving to a larger premium product selection like the Bottled in Bond and Single Barrel Barrel Proof options. This has helped a 6% increase in sales in Q3.

I would love to see more stockholder incentives and stockholder returns though.

Long BF.A
ron3637 profile picture
This company has one goal to enrich its owners, the Browns, at the expense of share holders. I would need to be very drunk before I would by this stock.
Peter Jaworowski profile picture
@ron3637 Looking at historical data going back to 1988, it looks like BF.B shares have had a CAGR of just over 14% a year. Based on that, I would say the company has enriched all of its owners, not just the Brown family.
Any chance of a merger with KO? Complimentary products
Peter Jaworowski profile picture
@justanopion doubtful since the Brown family controls about 70% of the voting right, I’m guessing they wouldn’t want to merge with anyone.
Librarian Capital profile picture
@justanopion I think the chance is zero. Neither side wants it.
Librarian Capital profile picture
@Peter Jaworowski Yes that's an additional reason.
J Q Ames profile picture
Thank you for covering this one. I've been watching it drift down to these price levels and was wondering about your thoughts on Brown-Forman given your prior research on Diageo, Pernod Ricard, Remy Cointreau, et al.
Librarian Capital profile picture
@J Q Ames Thank you. I was also intrigued by BF's share price but sadly it doesn't seem actionable right now.
Any thoughts about what entry point you would start buying into this BF?
Librarian Capital profile picture
@Francis_Bacon As disclosed, I am happy owning Diageo, which has a low 20s P/E and also a high-single-digit EPS growth.

Until BF demonstrates it can grow even faster than this, I don't think I will buy it at a higher P/E then where Diageo is.

So that means an entry price in the $40s (23x FY22 EPS $1.74). But it depends on what other stocks are available in the market too.
Yonakit profile picture
@Librarian Capital I like to add $60-62. Just a dash.

It’s been range bound awhile, consistently providing entry and exit points.

If it gets to $40, I will avoid. That will mean something’s impaired the business.
Yonakit profile picture
@Francis_Bacon when in doubt, I always like to pick up a tracker share. It gives me a benchmark and a stake. From there it’s getting a better understanding of the company and how the market reacts.
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