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Brown-Forman: Does Not Deserve This Premium

Jun. 02, 2023 10:55 PM ETBrown-Forman Corporation (BF.A), BF.B5 Comments
Prasanna Rajagopal profile picture
Prasanna Rajagopal


  • Brown-Forman has strong brands and attractive end markets, with potential for growth in international markets.
  • The company has impressive gross and operating margins, but its current valuation may be too high for new investors.
  • Brown-Forman's low dividend yield and overvaluation may require investors to wait for market volatility to push the stock lower before adding to their portfolio.

Jack Daniels & New York Magazine Celebrate Jack Daniels" Sinatra Select

Stephen Lovekin

Brown-Forman (NYSE:BF.B) has strong brands serving attractive end markets. The company’s torrid pace of sales growth over the past couple of years, driven by pandemic lockdowns and stimulus spending, may have ended. But the company can continue growing at a

This article was written by

Prasanna Rajagopal profile picture
Prasanna Rajagopal comes with in-depth knowledge of the technology industry, having spent over 15 years in various sectors of the software industry. Prasanna loves to learn and write about business and investment opportunities in technology, media, retail, and industrial companies. Prasanna has a M.B.A. from UCLA Anderson School of Management, a M.S. in Industrial Engineering from Wichita State University and a Bachelor's degree in Mechanical Engineering from University of Madras.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of VOO, VDC either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (5)

What I really like about Brown-Forman is that it is a family controlled company that enables them to plan long term without worrying about quarterly earnings. There are very few public companies remaining that are controlled by a family. They are making strategic investments and slowly increasing their worldwide distribution footprint. Only one company in the world makes Jack Daniels and every real bar in the world has a bottle of Jack!
Prasanna Rajagopal profile picture
@Karasjok Well said! You're right; their strong brand allows them to charge a premium.
DanTheMan1984 profile picture
@Prasanna Rajagopal it deserves the valuation as much as NVDA does a 1.1 trillion valuation you wanna talk about over valued !
Don’t they have an earnings announcement on the 7th. Then we will know if your right or wrong
Prasanna Rajagopal profile picture
@Jimmy54 $BF.B has tech-like operating margins. Impressive! But, it has struggled to convert its margins and profits into cash. Its Free Cash Flow conversion has never exceeded 100% over the past decade. One answer to this might lie in its CapEx. The Company spends more on CapEx each year than it registers in depreciation and amortization. I am not sure why that would be the case. No wonder its FCF yield is too low. Maybe they must continuously invest in barrels or casks to age their liquors. I am eager to own this great brand at a lower valuation.
I am grateful for your time!
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