Stock Analysis on Net
Stock Analysis on Net

Constellation Brands Inc. (NYSE:STZ)

This company has been moved to the archive! The financial data has not been updated since January 5, 2023.

Dividend Discount Model (DDM)

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In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Dividends are the cleanest and most straightforward measure of cash flow because these are clearly cash flows that go directly to the investor.

Intrinsic Stock Value (Valuation Summary)

Constellation Brands Inc., dividends per share (DPS) forecast

US$

Microsoft Excel
Year Value DPSt or Terminal value (TVt) Calculation Present value at 15.07%
0 DPS01 3.04
1 DPS1 3.41 = 3.04 × (1 + 12.02%) 2.96
2 DPS2 3.83 = 3.41 × (1 + 12.37%) 2.89
3 DPS3 4.31 = 3.83 × (1 + 12.72%) 2.83
4 DPS4 4.88 = 4.31 × (1 + 13.07%) 2.78
5 DPS5 5.53 = 4.88 × (1 + 13.42%) 2.74
5 Terminal value (TV5) 379.72 = 5.53 × (1 + 13.42%) ÷ (15.07% – 13.42%) 188.23
Intrinsic value of Constellation Brands Inc. common stock (per share) $202.43
Current share price $208.68

Based on: 10-K (reporting date: 2022-02-28).

1 DPS0 = Sum of the last year dividends per share of Constellation Brands Inc. common stock. See details »

Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.

Required Rate of Return (r)

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Assumptions
Rate of return on LT Treasury Composite1 RF 4.68%
Expected rate of return on market portfolio2 E(RM) 13.78%
Systematic risk of Constellation Brands Inc. common stock βSTZ 1.14
 
Required rate of return on Constellation Brands Inc. common stock3 rSTZ 15.07%

1 Unweighted average of bid yields on all outstanding fixed-coupon U.S. Treasury bonds neither due or callable in less than 10 years (risk-free rate of return proxy).

2 See details »

3 rSTZ = RF + βSTZ [E(RM) – RF]
= 4.68% + 1.14 [13.78% – 4.68%]
= 15.07%

Dividend Growth Rate (g)

Dividend growth rate (g) implied by PRAT model

Constellation Brands Inc., PRAT model

Microsoft Excel
Average Feb 28, 2022 Feb 28, 2021 Feb 29, 2020 Feb 28, 2019 Feb 28, 2018 Feb 28, 2017
Selected Financial Data (US$ in thousands)
Dividends declared 572,000 575,500 569,100 558,900 400,700 315,600
Net income (loss) attributable to CBI (40,400) 1,998,000 (11,800) 3,435,900 2,318,900 1,535,100
Net sales 8,820,700 8,614,900 8,343,500 8,116,000 7,585,000 7,331,500
Total assets 25,855,800 27,104,800 27,323,200 29,231,500 20,538,700 18,602,400
Total CBI stockholders’ equity 11,731,900 13,598,900 12,131,800 12,551,000 8,046,100 6,891,200
Financial Ratios
Retention rate1 — 0.71 — 0.84 0.83 0.79
Profit margin2 -0.46% 23.19% -0.14% 42.33% 30.57% 20.94%
Asset turnover3 0.34 0.32 0.31 0.28 0.37 0.39
Financial leverage4 2.20 1.99 2.25 2.33 2.55 2.70
Averages
Retention rate 0.79
Profit margin 19.41%
Asset turnover 0.33
Financial leverage 2.34
 
Dividend growth rate (g)5 12.02%

Based on: 10-K (reporting date: 2022-02-28), 10-K (reporting date: 2021-02-28), 10-K (reporting date: 2020-02-29), 10-K (reporting date: 2019-02-28), 10-K (reporting date: 2018-02-28), 10-K (reporting date: 2017-02-28).

2022 Calculations

1 Retention rate = (Net income (loss) attributable to CBI – Dividends declared) ÷ Net income (loss) attributable to CBI
= (-40,400 – 572,000) ÷ -40,400
= —

2 Profit margin = 100 × Net income (loss) attributable to CBI ÷ Net sales
= 100 × -40,400 ÷ 8,820,700
= -0.46%

3 Asset turnover = Net sales ÷ Total assets
= 8,820,700 ÷ 25,855,800
= 0.34

4 Financial leverage = Total assets ÷ Total CBI stockholders’ equity
= 25,855,800 ÷ 11,731,900
= 2.20

5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= 0.79 × 19.41% × 0.33 × 2.34
= 12.02%

Dividend growth rate (g) implied by Gordon growth model

g = 100 × (P0 × r – D0) ÷ (P0 + D0)
= 100 × ($208.68 × 15.07% – $3.04) ÷ ($208.68 + $3.04)
= 13.42%

where:
P0 = current price of share of Constellation Brands Inc. common stock
D0 = the last year dividends per share of Constellation Brands Inc. common stock
r = required rate of return on Constellation Brands Inc. common stock

Dividend growth rate (g) forecast

Constellation Brands Inc., H-model

Microsoft Excel
Year Value gt
1 g1 12.02%
2 g2 12.37%
3 g3 12.72%
4 g4 13.07%
5 and thereafter g5 13.42%

where:
g1 is implied by PRAT model
g5 is implied by Gordon growth model
g2, g3 and g4 are calculated using linear interpoltion between g1 and g5

Calculations

g2 = g1 + (g5 – g1) × (2 – 1) ÷ (5 – 1)
= 12.02% + (13.42% – 12.02%) × (2 – 1) ÷ (5 – 1)
= 12.37%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= 12.02% + (13.42% – 12.02%) × (3 – 1) ÷ (5 – 1)
= 12.72%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= 12.02% + (13.42% – 12.02%) × (4 – 1) ÷ (5 – 1)
= 13.07%