Brown Forman (NYSE:BFb) (NYSE:BFa) is a $21 billion company today. Investors that bought shares one year ago are sitting on a 2.6% total return. That's below the S&P 500's return of 13.51%.
Brown-Forman stock is underperforming the market. It's beaten down, but it reports earnings next week. So is it a good time to buy? To answer this question, we've turned to the Investment U Stock Grader. Our Research Team built this system to diagnose the financial health of a company.
Our system looks at six key metrics...
✗ Earnings-per-Share (EPS) Growth: Brown-Forman reported a recent EPS growth rate of -70.98%. That's below the beverages industry average of 112.54%. That's not a good sign. We like to see companies that have higher earnings growth.
✓ Price-to-Earnings (P/E): The average price-to-earnings ratio of the beverages industry is 37.85. And Brown-Forman's ratio comes in at 29.94. It's trading at a better value than many of its competitors.
✗ Debt-to-Equity : The debt-to-equity ratio for Brown-Forman stock is 156.86%. That's above the beverages industry average of 51.77%. That's not a good sign. Brown-Forman's debt levels should be lower.
✓ Free Cash Flow per Share Growth : Brown-Forman's FCF has been higher than that of its competitors over the last year. That's good for investors. In general, if a company is growing its FCF, it will be able to pay down debt, buy back stock, pay out more in dividends and/or invest money back into the business to help boost growth. It's one of our most important fundamental factors.
✓ Profit Margins : The profit margin of Brown-Forman comes in at 20.75% today. And generally, the higher, the better. We also like to see this margin above that of its competitors. Brown-Forman's profit margin is above the beverages average of 19.08%. So that's a positive indicator for investors.
✓ Return on Equity : Return on equity gives us a look at the amount of net income returned to shareholders. The ROE for Brown-Forman is 45.5%, and that's above its industry average ROE of 17.99%.
Brown-Forman stock passes four of our six key metrics today. That's why our Investment U Stock Grader rates it as a Buy With Caution.