Brown-Forman Corporation (BF-A): what the price requires
The current priced-in claim for Brown-Forman Corporation (BF-A) is temporarily suppressed because the live engine record is unavailable. The dated report remains a snapshot, not a current market read.
Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/BF-A
Headline
| Field | Value |
|---|---|
| Ticker | BF-A |
| Company | Brown-Forman Corporation |
| Current price | $26.63/sh |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin needed | 11.6% |
| Operating margin today | 29.3% |
| Margin compression implied | -17.7pp |
| Multiple paid | 11x operating income |
The operating-margin requirement is derived from the framework's value band at year 12, a separately labeled basis from the headline growth/duration solve.
The price sits below what even a 5%/yr operating-profit decline would warrant; the inversion reports a bound, not a solved growth path.
Solve inputs: computed at a 7.7% cost of capital with 4% terminal growth over a 5-year stage.
Reconcile: at the x-ray's 9.3% required return this reads ~-0.8%/yr; the models below use their own rates.
How unusual the bet is: within-range
| Reference | Value |
|---|---|
| vs own history | -0.76σ |
| cohort percentile (of 69 peers) | 12 |
| implied end-window share | 0% |
Valuation X-Ray
The price is justified by relative-multiple; earnings-power land below the price.
How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 1.35x | 4 | expensive |
| Earnings | 1.68x | 4 | expensive |
| Relative | 1.05x | 3 | expensive |
| Growth | 1.37x | 4 | expensive |
Families that justify the price: Relative Families that call it expensive: Earnings
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 7.6%); the inversion above states its own rate.
Per-Model Detail (n=15)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $21.88 | 1.22x | yes | FCF base $0.9B, growth 1% (input: historical growth), terminal g 0.6%, WACC 7.6%, 5yr projection |
| DCF Exit Multiple | Growth | $26.56 | 1.00x | yes | Exit EV/EBITDA: 12.6x / 14.6x / 16.6x (bear / base = today's held flat / bull), 5yr |
| Relative Valuation | Relative | $29.73 | 0.90x | yes | P/E 22x (static sector reference · 2026-04), scenarios: 18.7x / 22.0x / 25.3x (bear / base = reference held flat / bull), EV/EBITDA 14x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | $5.03 | 5.29x | yes | Stage 1: -22% for 5yr, Stage 2: 3.5% perpetual |
| Simple Excess Return | Asset | $16.70 | 1.59x | yes | BV/sh $8.69, ROE (TTM) 17.8%, ke 9.3% |
| Two-Stage Excess Return | Asset | $22.86 | 1.16x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $17.49 | 1.52x | yes | Rev $5.1B, growth 1% (input: historical growth; tapered), Terminal P/S: 2.1x / 2.4x / 2.8x (bear / base = today's held flat / bull, cap 8x) |
| Growth-Adjusted P/E | Relative | — | — | no | — |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $20.02 | 1.33x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $1.19B × (1−24%) / WACC 7.6% → EPV (no growth) |
| Residual Income | Asset | $22.78 | 1.17x | yes | BV $8.69 + 5yr PV of (ROE (TTM) 17.8% − Kₑ 9.3%) × BV; BV grows 8.8%/yr |
| Graham Number | Asset | $17.29 | 1.54x | yes | √(22.5 × EPS $1.53 × BVPS $8.69) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $25.36 | 1.05x | yes | EBITDA $1.02B × sector EV/EBITDA 14.0x |
| FCF Yield | Earnings | $15.27 | 1.74x | yes | FCF $893.0M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | $14.52 | 1.83x | yes | SBC-adj FCF $0.86B (FCF $0.89B − SBC $0.03B) capitalized at Kₑ |
| Ben Graham Formula | Earnings | $1.28 | 20.80x | yes | EPS $1.53 × (8.5 + 2×-5.0%) × (4.4 / 5.3%) (excluded from median) |
| ROIC-Justified P/B | Asset | $1.26 | 21.13x | yes | BV $8.69 × (ROIC 1.1% / WACC 7.6%) (excluded from median) |
| P/Sales Sector | Relative | $21.96 | 1.21x | yes | Revenue $5.08B × sector P/S 2.0x |
| PEG Fair Value | Relative | — | — | no | — |
| Earnings Yield | Earnings | $16.54 | 1.61x | yes | EPS $1.53 / required return 9.3% (Rf 4.3% + ERP 5.0%) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net debt | $2.2b |
| Net debt / NOPAT (after-tax) | 2.43x |
| Net debt / operating income (pre-tax) | 1.85x |
| Interest coverage | 11.0x |
| Share count CAGR (buyback) | -0.9% |
| Burning cash | no |
Bullet Takeaways
- Brown-Forman, the maker of Jack Daniel's, is trading near an 11-times multiple on operating income, a level that prices in continued decline for a brand portfolio that has compounded for decades.
- The acute pressure is geopolitical, not structural: a Canadian boycott of American spirits tied to U.S. tariff policy cut Canada sales sharply, and reported operating income fell 10% for the full fiscal year on impairment and inventory charges.
- The watch item is whether organic trends stabilize as the tariff disruption works through; full-year organic net sales were flat even as reported figures fell, suggesting the underlying brands held while the headlines did the damage.
Bull Case
The counterintuitive fact about Brown-Forman right now is that the business barely moved while the stock and the reported numbers cratered. For fiscal 2026, reported net sales fell 1% to $3.9 billion but were flat on an organic basis, and reported operating income dropped 10% to $1.0 billion yet declined only 2% organically. The gap between reported and organic is the whole bull case in one line: the damage came from foreign-exchange, divestitures, and one-time charges, not from the underlying brands losing their grip on the consumer. A 200-year-old portfolio led by Jack Daniel's does not lose its franchise in a year; it gets repriced by headlines.
The brand engine still works where trade politics let it. The 10-K points to Brazil net sales up 12% on the volumetric growth of the Jack Daniel's family of brands, reflecting expanded distribution, increased consumer-led demand, and to innovation within the Jack Daniel's family that has contributed to our growth in the last two fiscal years, from flavored extensions to ready-to-drink formats. These are the levers a premium spirits company pulls to grow without discounting, and they are still pulling in markets not caught in the tariff crossfire. Premium spirits remain a structurally attractive category: brand loyalty is durable, pricing power is real, and the assets are irreplaceable.
Net debt of about $2.2 billion sits at roughly two times operating income with interest coverage near 9.7 times, comfortable for a consumer-staples business, and the share count keeps drifting down through buybacks. At about 11 times operating income, the price sits below what even a 5%-a-year decline in operating profit would warrant, which is to say the market is pricing in deterioration that the organic numbers do not yet show. For a company with this brand equity, a price that already assumes ongoing decline is the setup the patient buyer looks for.
Bear Case
The bear case is a sector caught between a cyclical hangover and a political shock, and Brown-Forman sits in the middle of both. Spirits demand has been working off a pandemic-era bulge: distributors overstocked, consumers pulled forward purchases, and the industry has spent two years destocking back to normal. Layered on top is the acute damage from trade politics. The Canadian boycott of American alcohol, spurred by U.S. tariff policy, cut Canada sales by 62% in a quarter, and the EU and Canadian provinces have begun removing American spirits from shelves. Jack Daniel's is one of America's most visible whiskey exports, which makes it a target precisely because it is iconic. This is demand destruction the company cannot control and cannot quickly replace.
The reported earnings show how hard those forces hit. Full-year reported operating income fell 10% to $1.0 billion and diluted EPS dropped 17% to $1.53, with the fourth quarter brutal: operating income down 53% and EPS down 62% to $0.12, weighed by impairment and inventory charges. Even allowing for one-time items, the trajectory is down, and the question a holder must face is whether peak spirits demand and peak Jack Daniel's distribution are behind the company rather than ahead of it. Operating margin has compressed from the high-20s and 30s the company once earned to under 20% on a trailing basis, and a margin that has fallen this far does not always snap back on schedule.
The valuation looks cheap, but the earnings-power lens says otherwise, and the reason matters. At 11 times operating income the multiple is low, yet the earnings-power method, which values the company on its recent average profitability, reads the price as expensive because that average is now falling. If the tariff disruption persists, if GLP-1 weight-loss drugs durably dent alcohol consumption, or if the destocking gives way to genuine demand softness rather than a one-time reset, then the "cheap" multiple is cheap against earnings that keep shrinking. A low multiple on a declining base is a value trap, not a bargain, and the bear's job is to ask whether the decline is temporary or the new normal.
Valuation
The price tells a story of expected decline. At about 11 times company-wide operating income, Brown-Forman trades below what even a 5%-a-year drop in operating profit would justify, which means the market is already pricing in continued deterioration. For a premium spirits franchise that has compounded for generations, that is an unusual posture, and it reflects the tariff shock and the spirits-industry destocking rather than a verdict on the brands themselves.
The methods disagree in an instructive way. The relative-multiple family justifies the price, comparing Brown-Forman to other consumer-staples and spirits names where the stock now trades at a discount to its own past richness. The earnings-power lens, by contrast, reads the price as expensive, not because 11 times is high but because the recent average operating income the method capitalizes is falling. That tension is the crux: the price is cheap against a stable earnings base and full against a declining one, and which is right depends entirely on whether the current margin compression reverses. The asset and growth lenses sit roughly at the price, leaving the read genuinely balanced.
Solvency removes the downside-disaster scenario. Net debt of about $2.2 billion at roughly two times operating income, with interest coverage near 9.7 times, is a conservative balance sheet for a consumer-staples company, and the steady buyback keeps shrinking the share count. The dividend, long a hallmark of the stock, is well covered even at the depressed earnings level, though the tariff-battered results have put its growth rate under more scrutiny than usual. The downside here is not financial; it is the risk that the earnings base settles permanently lower. A buyer at this price is betting the organic stability, flat full-year organic net sales, proves more durable than the reported decline, and that the brands re-rate once the trade disruption clears.
Catalysts
Brown-Forman closed fiscal 2026, ended April 30, with results that split sharply between reported and organic. Full-year reported net sales fell 1% to $3.9 billion but were flat organically, and reported operating income declined 10% to $1.0 billion, down 2% organically, with diluted EPS off 17% to $1.53. The fourth quarter showed the strain most clearly: net sales rose 2% but reported operating income fell 53% to $96 million and EPS dropped to $0.12, weighed by impairment and inventory charges.
The dominant driver was trade politics. The Canadian boycott of American alcohol, tied to U.S. tariff policy, drove a steep decline in Canada sales, and the EU and Canadian provinces have moved to pull American spirits from shelves. As one of the most recognizable American whiskey exports, Jack Daniel's is squarely in the line of retaliatory trade actions, a headwind the company cannot resolve on its own.
The path forward turns on a few variables. Whether the tariff and boycott pressure eases or hardens is the largest, followed by the pace of the spirits-industry destocking normalizing and the durability of demand against weight-loss-drug concerns. Management reaffirmed its outlook through the year despite the disruption, so the near-term test is whether organic trends continue to hold flat while the reported figures recover as one-time charges roll off.
Peer Cohorts (Per Segment, With Filing Citations)
Core business (reported)
- BF-B (Brown-Forman Corporation)
- (no filing in the citation store)
- DEO (DIAGEO plc)
- (no filing in the citation store)
- STZ (CONSTELLATION BRANDS, INC.)
- (no filing in the citation store)
- SAM (THE BOSTON BEER COMPANY, INC.)
- (no filing in the citation store)
- TAP (MOLSON COORS BEVERAGE CO)
- (no filing in the citation store)
- KDP (Keurig Dr Pepper Inc.)
- (no filing in the citation store)
- FIZZ (National Beverage Corp.)
- (no filing in the citation store)
- MKC (McCORMICK & COMPANY, INCORPORATED)
- (no filing in the citation store)
Methodology Note
- Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
- Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
- Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
- Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.
Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.
Sources
Brown-Forman FY2026 results, June 2026 · Food Dive / Brown-Forman FY2026 commentary