Brown-Forman Corporation (BF-B): what the price requires
The current priced-in claim for Brown-Forman Corporation (BF-B) 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-B
Headline
| Field | Value |
|---|---|
| Ticker | BF-B |
| Company | Brown-Forman Corporation |
| Current price | $26.05/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 | 11.8% |
| Operating margin today | 29.3% |
| Margin compression implied | -17.5pp |
| 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 7.8% cost of capital with 4% terminal growth over a 5-year stage.
Reconcile: at the x-ray's 9.3% required return this reads ~-1.4%/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 | 1.33x | 4 | expensive |
| Earnings | 1.64x | 4 | expensive |
| Relative | 1.03x | 3 | expensive |
| Growth | 1.35x | 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 | $21.99 | 1.18x | yes | FCF base $0.9B, growth 1% (input: historical growth), terminal g 0.6%, WACC 7.6%, 5yr projection |
| DCF Exit Multiple | Growth | $26.17 | 1.00x | yes | Exit EV/EBITDA: 12.3x / 14.3x / 16.3x (bear / base = today's held flat / bull), 5yr |
| Relative Valuation | Relative | $29.73 | 0.88x | 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 | 5.18x | yes | Stage 1: -22% for 5yr, Stage 2: 3.5% perpetual |
| Simple Excess Return | Asset | $16.70 | 1.56x | yes | BV/sh $8.69, ROE (TTM) 17.8%, ke 9.3% |
| Two-Stage Excess Return | Asset | $22.86 | 1.14x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $17.11 | 1.52x | yes | Rev $5.1B, growth 1% (input: historical growth; tapered), Terminal P/S: 2.0x / 2.4x / 2.7x (bear / base = today's held flat / bull, cap 8x) |
| Growth-Adjusted P/E | Relative | — | — | no | — |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $20.12 | 1.29x | 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 | 1.14x | 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 | 1.51x | yes | √(22.5 × EPS $1.53 × BVPS $8.69) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $25.36 | 1.03x | yes | EBITDA $1.02B × sector EV/EBITDA 14.0x |
| FCF Yield | Earnings | $15.27 | 1.71x | yes | FCF $893.0M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | $14.52 | 1.79x | yes | SBC-adj FCF $0.86B (FCF $0.89B − SBC $0.03B) capitalized at Kₑ |
| Ben Graham Formula | Earnings | $1.28 | 20.35x | yes | EPS $1.53 × (8.5 + 2×-5.0%) × (4.4 / 5.3%) (excluded from median) |
| ROIC-Justified P/B | Asset | $1.26 | 20.67x | yes | BV $8.69 × (ROIC 1.1% / WACC 7.6%) (excluded from median) |
| P/Sales Sector | Relative | $21.96 | 1.19x | yes | Revenue $5.08B × sector P/S 2.0x |
| PEG Fair Value | Relative | — | — | no | — |
| Earnings Yield | Earnings | $16.54 | 1.57x | 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
- One number frames Brown-Forman today: full-year organic net sales were flat while reported net sales fell 1%, so the business held steady even as currency, divestitures, and one-time charges dragged the headline down.
- The stock prices in decline, trading near 11 times operating income, a level below what even a modest profit fade would warrant for a brand portfolio led by Jack Daniel's.
- The defining risk is trade politics: a Canadian boycott of American spirits cut Canada sales sharply and pushed reported operating income down 10% for the year, and the duration of that disruption is what the next several quarters hinge on.
Bull Case
Flat organic net sales is the metric that anchors the bull case, because it is the one the noise cannot touch. In fiscal 2026, Brown-Forman's reported net sales fell 1% to $3.9 billion, but stripped of currency and divestitures, organic net sales were flat, and organic operating income fell only 2% against a reported decline of 10%. When a company gets battered in the headlines but the underlying volume and pricing hold, the market is selling the headline and the patient buyer is buying the business. That is the situation here.
The reason the franchise holds is that Jack Daniel's is not a product, it is a brand with two centuries of equity, and Brown-Forman keeps extending it. The 10-K describes how innovation within the Jack Daniel's family of brands has contributed to our growth in the last two fiscal years, through flavored whiskeys and ready-to-drink formats that reach new occasions without diluting the core, and notes markets like Brazil where net sales rose 12% on the volumetric growth of the Jack Daniel's family of brands, reflecting expanded distribution, increased consumer-led demand. Where trade politics are not in the way, the brand still compounds.
Then there is what you pay for it. At roughly 11 times operating income, the price sits below the level that even a 5%-a-year decline in profit would justify, so the market is already pricing in shrinkage. The balance sheet gives that bet a floor: net debt near $2.2 billion at about two times operating income, interest coverage close to 9.7 times, and a share count that keeps falling through buybacks. A premium spirits company with irreplaceable brands, a conservative balance sheet, and a price that assumes decline is the kind of setup that rewards a long horizon, provided the decline proves cyclical rather than permanent.
Bear Case
The gap between price and fundamentals usually argues for the stock; here it argues against complacency, because the fundamentals themselves are pointed down and the cause is hard to fix. Brown-Forman's reported operating income fell 10% for the full year and the fourth quarter was severe, operating income down 53% and diluted EPS down 62% to $0.12, hit by impairment and inventory charges. A holder cannot wave that away as accounting alone: it reflects a portfolio absorbing a real demand shock while the spirits industry is still digesting a post-pandemic inventory bulge. The qualitative truth is that the company is fighting a two-front war, a cyclical destocking and a political boycott, and it controls neither front.
The political front is the more dangerous because it targets the company's greatest asset. The Canadian boycott of American alcohol, driven by U.S. tariff policy, cut Canada sales by 62% in a quarter, and Canadian provinces and the EU have begun removing American spirits from shelves. Jack Daniel's iconic status, the source of its pricing power, is exactly what makes it a symbolic target in a trade fight. If retaliatory measures broaden or persist, the export-heavy revenue base erodes in markets that took decades to build, and rebuilding distribution after a boycott is slow work.
That is why the cheap multiple deserves suspicion. The earnings-power lens reads the price as expensive despite the low 11-times multiple, because the recent-average profitability it capitalizes is declining. Operating margin has compressed well below the high-20s and 30s Brown-Forman once earned, and a low multiple on a falling earnings base is the textbook shape of a value trap. The bear does not claim the brands are worthless; it claims the price is cheap only if the earnings stabilize, and that stabilization depends on trade politics and a demand cycle that may not cooperate. Until margins turn, the disconnect between an 11-times multiple and a shrinking profit base is a warning, not a bargain.
Valuation
Brown-Forman's valuation hinges on a single question: is the current earnings base stable or still falling. At about 11 times operating income, the price already embeds continued decline, sitting below what even a 5%-a-year profit fade would warrant. For a franchise that has compounded for generations, that posture is the market's verdict that the tariff shock and the industry destocking are not yet over.
The two valuation lenses that matter most disagree, and the disagreement is the point. The relative-multiple method justifies the price, because against other consumer-staples and spirits names Brown-Forman now trades at a discount to its historical richness. The earnings-power method calls it expensive, not because 11 times is high in the abstract, but because the recent average operating income it values is shrinking. Read against a stable base, the stock is cheap; read against a declining one, it is not, and the resolution depends entirely on whether margins, now under 20% on a trailing basis against a much higher past, recover. The asset and growth lenses land near the price, which leaves the overall read finely balanced rather than clearly cheap.
On the balance sheet, the picture is reassuring and bounds the downside cleanly. Net debt of about $2.2 billion at roughly two times operating income, with interest coverage near 9.7 times, is conservative for a consumer-staples company, and the ongoing buyback steadily reduces the share count. The long-standing dividend remains covered even on the depressed earnings, though the tariff-driven profit decline has made its forward growth a sharper question than usual. The downside is not solvency; it is the chance that the earnings base settles permanently lower. A buyer at this price is wagering that flat organic results are the true signal and the reported decline is the temporary one.
Catalysts
Fiscal 2026, ended April 30, was a year where the reported numbers and the underlying business diverged. Brown-Forman's full-year reported net sales fell 1% to $3.9 billion, flat organically, while reported operating income declined 10% to $1.0 billion, down 2% organically, and diluted EPS fell 17% to $1.53. The fourth quarter carried the heaviest charges: net sales up 2%, but reported operating income down 53% to $96 million and EPS of $0.12, pressured by impairment and inventory items.
The central event behind the decline is trade politics. The Canadian boycott of American alcohol, spurred by U.S. tariff policy, drove a steep drop in Canada sales, and the EU and Canadian provinces have moved to remove American spirits from shelves. As one of America's most visible whiskey exports, Jack Daniel's is a natural target for retaliatory action, and that exposure is the company's hardest near-term variable to forecast.
The signposts ahead are clear even if their timing is not: any easing or hardening of the tariff and boycott dynamic, the pace at which the spirits-industry destocking normalizes, and the trajectory of demand against weight-loss-drug concerns. Management held its outlook through the year despite the disruption, so the key tell going forward is whether organic results keep holding flat while reported figures recover as one-time charges roll off.
Peer Cohorts (Per Segment, With Filing Citations)
Brown-Forman (consolidated) (reported)
- 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