By Rob Otman
Brown-Forman (NYSE: BF) 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…
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✗ 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.
Please note that our fundamental factor checklist is just the first step in performing your own due diligence. There are many other factors you should consider before investing. That’s why The Oxford Club offers more than a dozen newsletters and trading advisories all aimed at helping investors grow and maintain their wealth.
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Source:: Investment You
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