Intrinsic value of Constellation Brands Cl A - STZ

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$173.03

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$173.03

 
Intrinsic value

$109.61

 
Up/down potential

-37%

 
Rating

sell

 
Value-price divergence* premium content

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*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of STZ stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 33.9

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  8.63
  10.40
  9.86
  9.37
  8.94
  8.54
  8.19
  7.87
  7.58
  7.32
  7.09
  6.88
  6.69
  6.53
  6.37
  6.24
  6.11
  6.00
  5.90
  5.81
  5.73
  5.66
  5.59
  5.53
  5.48
  5.43
  5.39
  5.35
  5.31
  5.28
  5.25
Revenue, $m
  6,548
  7,229
  7,942
  8,686
  9,462
  10,271
  11,112
  11,986
  12,895
  13,840
  14,821
  15,841
  16,902
  18,005
  19,152
  20,346
  21,590
  22,886
  24,236
  25,644
  27,113
  28,647
  30,249
  31,922
  33,671
  35,499
  37,412
  39,413
  41,508
  43,700
  45,996
Variable operating expenses, $m
 
  3,432
  3,700
  3,980
  4,272
  4,575
  4,892
  5,220
  5,562
  5,917
  6,286
  5,956
  6,355
  6,769
  7,201
  7,650
  8,117
  8,604
  9,112
  9,642
  10,194
  10,771
  11,373
  12,002
  12,659
  13,347
  14,066
  14,818
  15,606
  16,430
  17,293
Fixed operating expenses, $m
 
  1,692
  1,735
  1,778
  1,822
  1,868
  1,915
  1,963
  2,012
  2,062
  2,113
  2,166
  2,220
  2,276
  2,333
  2,391
  2,451
  2,512
  2,575
  2,639
  2,705
  2,773
  2,842
  2,913
  2,986
  3,061
  3,137
  3,216
  3,296
  3,379
  3,463
Total operating expenses, $m
  4,784
  5,124
  5,435
  5,758
  6,094
  6,443
  6,807
  7,183
  7,574
  7,979
  8,399
  8,122
  8,575
  9,045
  9,534
  10,041
  10,568
  11,116
  11,687
  12,281
  12,899
  13,544
  14,215
  14,915
  15,645
  16,408
  17,203
  18,034
  18,902
  19,809
  20,756
Operating income, $m
  1,764
  2,105
  2,507
  2,929
  3,369
  3,827
  4,306
  4,803
  5,322
  5,861
  6,422
  7,719
  8,327
  8,960
  9,619
  10,306
  11,022
  11,769
  12,549
  13,363
  14,214
  15,104
  16,034
  17,007
  18,025
  19,092
  20,209
  21,379
  22,606
  23,891
  25,240
EBITDA, $m
  1,985
  3,051
  3,476
  3,921
  4,386
  4,871
  5,376
  5,902
  6,449
  7,018
  7,611
  8,227
  8,869
  9,537
  10,233
  10,958
  11,714
  12,503
  13,326
  14,186
  15,084
  16,022
  17,004
  18,030
  19,105
  20,230
  21,408
  22,643
  23,937
  25,293
  26,715
Interest expense (income), $m
  310
  320
  362
  407
  454
  503
  554
  607
  662
  719
  779
  841
  905
  972
  1,041
  1,113
  1,189
  1,267
  1,349
  1,434
  1,522
  1,615
  1,712
  1,812
  1,918
  2,028
  2,143
  2,264
  2,390
  2,522
  2,660
Earnings before tax, $m
  1,501
  1,785
  2,145
  2,521
  2,914
  3,324
  3,752
  4,196
  4,659
  5,141
  5,643
  6,879
  7,422
  7,988
  8,578
  9,192
  9,833
  10,502
  11,200
  11,930
  12,692
  13,489
  14,322
  15,194
  16,107
  17,064
  18,066
  19,115
  20,216
  21,370
  22,580
Tax expense, $m
  440
  482
  579
  681
  787
  898
  1,013
  1,133
  1,258
  1,388
  1,524
  1,857
  2,004
  2,157
  2,316
  2,482
  2,655
  2,836
  3,024
  3,221
  3,427
  3,642
  3,867
  4,102
  4,349
  4,607
  4,878
  5,161
  5,458
  5,770
  6,097
Net income, $m
  1,055
  1,303
  1,566
  1,841
  2,127
  2,427
  2,739
  3,063
  3,401
  3,753
  4,119
  5,021
  5,418
  5,831
  6,262
  6,710
  7,178
  7,666
  8,176
  8,709
  9,265
  9,847
  10,455
  11,092
  11,758
  12,457
  13,188
  13,954
  14,758
  15,600
  16,484

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  83
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  16,965
  18,631
  20,468
  22,387
  24,388
  26,471
  28,639
  30,893
  33,235
  35,670
  38,199
  40,829
  43,562
  46,404
  49,361
  52,439
  55,644
  58,983
  62,464
  66,093
  69,880
  73,833
  77,961
  82,273
  86,781
  91,493
  96,423
  101,580
  106,978
  112,630
  118,547
Adjusted assets (=assets-cash), $m
  16,882
  18,631
  20,468
  22,387
  24,388
  26,471
  28,639
  30,893
  33,235
  35,670
  38,199
  40,829
  43,562
  46,404
  49,361
  52,439
  55,644
  58,983
  62,464
  66,093
  69,880
  73,833
  77,961
  82,273
  86,781
  91,493
  96,423
  101,580
  106,978
  112,630
  118,547
Revenue / Adjusted assets
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
Average production assets, $m
  6,301
  6,954
  7,640
  8,356
  9,103
  9,881
  10,690
  11,531
  12,405
  13,314
  14,258
  15,239
  16,260
  17,321
  18,424
  19,573
  20,770
  22,016
  23,315
  24,670
  26,083
  27,558
  29,099
  30,709
  32,391
  34,150
  35,990
  37,915
  39,930
  42,040
  44,249
Working capital, $m
  706
  2,082
  2,287
  2,502
  2,725
  2,958
  3,200
  3,452
  3,714
  3,986
  4,269
  4,562
  4,868
  5,185
  5,516
  5,860
  6,218
  6,591
  6,980
  7,386
  7,809
  8,250
  8,712
  9,194
  9,697
  10,224
  10,775
  11,351
  11,954
  12,586
  13,247
Total debt, $m
  8,081
  9,060
  10,182
  11,355
  12,577
  13,850
  15,174
  16,551
  17,983
  19,470
  21,016
  22,622
  24,292
  26,029
  27,836
  29,716
  31,675
  33,715
  35,841
  38,059
  40,373
  42,788
  45,310
  47,945
  50,699
  53,578
  56,590
  59,742
  63,040
  66,493
  70,109
Total liabilities, $m
  10,405
  11,384
  12,506
  13,679
  14,901
  16,174
  17,498
  18,875
  20,307
  21,794
  23,340
  24,946
  26,616
  28,353
  30,160
  32,040
  33,999
  36,039
  38,165
  40,383
  42,697
  45,112
  47,634
  50,269
  53,023
  55,902
  58,914
  62,066
  65,364
  68,817
  72,433
Total equity, $m
  6,560
  7,248
  7,962
  8,709
  9,487
  10,297
  11,141
  12,017
  12,929
  13,875
  14,860
  15,882
  16,946
  18,051
  19,202
  20,399
  21,646
  22,945
  24,298
  25,710
  27,183
  28,721
  30,327
  32,004
  33,758
  35,591
  37,508
  39,515
  41,615
  43,813
  46,115
Total liabilities and equity, $m
  16,965
  18,632
  20,468
  22,388
  24,388
  26,471
  28,639
  30,892
  33,236
  35,669
  38,200
  40,828
  43,562
  46,404
  49,362
  52,439
  55,645
  58,984
  62,463
  66,093
  69,880
  73,833
  77,961
  82,273
  86,781
  91,493
  96,422
  101,581
  106,979
  112,630
  118,548
Debt-to-equity ratio
  1.232
  1.250
  1.280
  1.300
  1.330
  1.350
  1.360
  1.380
  1.390
  1.400
  1.410
  1.420
  1.430
  1.440
  1.450
  1.460
  1.460
  1.470
  1.480
  1.480
  1.490
  1.490
  1.490
  1.500
  1.500
  1.510
  1.510
  1.510
  1.510
  1.520
  1.520
Adjusted equity ratio
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,055
  1,303
  1,566
  1,841
  2,127
  2,427
  2,739
  3,063
  3,401
  3,753
  4,119
  5,021
  5,418
  5,831
  6,262
  6,710
  7,178
  7,666
  8,176
  8,709
  9,265
  9,847
  10,455
  11,092
  11,758
  12,457
  13,188
  13,954
  14,758
  15,600
  16,484
Depreciation, amort., depletion, $m
  221
  946
  969
  992
  1,017
  1,043
  1,070
  1,098
  1,127
  1,158
  1,189
  508
  542
  577
  614
  652
  692
  734
  777
  822
  869
  919
  970
  1,024
  1,080
  1,138
  1,200
  1,264
  1,331
  1,401
  1,475
Funds from operations, $m
  1,228
  2,249
  2,534
  2,833
  3,145
  3,470
  3,809
  4,162
  4,529
  4,911
  5,308
  5,529
  5,960
  6,409
  6,876
  7,363
  7,871
  8,400
  8,953
  9,531
  10,134
  10,765
  11,425
  12,116
  12,838
  13,595
  14,388
  15,218
  16,089
  17,001
  17,958
Change in working capital, $m
  -186
  196
  205
  214
  224
  233
  242
  252
  262
  272
  283
  294
  305
  318
  330
  344
  358
  373
  389
  406
  423
  442
  461
  482
  504
  527
  551
  576
  603
  631
  661
Cash from operations, $m
  1,414
  2,490
  2,329
  2,619
  2,921
  3,237
  3,567
  3,910
  4,267
  4,639
  5,026
  5,236
  5,655
  6,091
  6,545
  7,019
  7,512
  8,027
  8,564
  9,125
  9,711
  10,324
  10,964
  11,634
  12,334
  13,068
  13,837
  14,642
  15,485
  16,370
  17,297
Maintenance CAPEX, $m
  0
  -210
  -232
  -255
  -279
  -303
  -329
  -356
  -384
  -414
  -444
  -475
  -508
  -542
  -577
  -614
  -652
  -692
  -734
  -777
  -822
  -869
  -919
  -970
  -1,024
  -1,080
  -1,138
  -1,200
  -1,264
  -1,331
  -1,401
New CAPEX, $m
  -891
  -654
  -686
  -716
  -747
  -778
  -809
  -841
  -874
  -909
  -944
  -981
  -1,020
  -1,061
  -1,104
  -1,149
  -1,196
  -1,246
  -1,299
  -1,355
  -1,413
  -1,475
  -1,541
  -1,610
  -1,682
  -1,759
  -1,840
  -1,925
  -2,015
  -2,109
  -2,209
Cash from investing activities, $m
  -2,207
  -864
  -918
  -971
  -1,026
  -1,081
  -1,138
  -1,197
  -1,258
  -1,323
  -1,388
  -1,456
  -1,528
  -1,603
  -1,681
  -1,763
  -1,848
  -1,938
  -2,033
  -2,132
  -2,235
  -2,344
  -2,460
  -2,580
  -2,706
  -2,839
  -2,978
  -3,125
  -3,279
  -3,440
  -3,610
Free cash flow, $m
  -793
  1,626
  1,412
  1,648
  1,896
  2,156
  2,428
  2,712
  3,008
  3,317
  3,638
  3,779
  4,126
  4,488
  4,864
  5,256
  5,664
  6,089
  6,532
  6,993
  7,476
  7,979
  8,504
  9,054
  9,628
  10,229
  10,858
  11,517
  12,207
  12,929
  13,687
Issuance/(repayment) of debt, $m
  749
  1,062
  1,122
  1,172
  1,222
  1,273
  1,324
  1,377
  1,431
  1,487
  1,546
  1,606
  1,670
  1,737
  1,807
  1,881
  1,958
  2,040
  2,126
  2,218
  2,314
  2,415
  2,522
  2,635
  2,754
  2,880
  3,012
  3,151
  3,298
  3,453
  3,616
Issuance/(repurchase) of shares, $m
  79
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  1,018
  1,062
  1,122
  1,172
  1,222
  1,273
  1,324
  1,377
  1,431
  1,487
  1,546
  1,606
  1,670
  1,737
  1,807
  1,881
  1,958
  2,040
  2,126
  2,218
  2,314
  2,415
  2,522
  2,635
  2,754
  2,880
  3,012
  3,151
  3,298
  3,453
  3,616
Total cash flow (excl. dividends), $m
  215
  2,688
  2,534
  2,820
  3,118
  3,429
  3,753
  4,089
  4,440
  4,804
  5,183
  5,385
  5,796
  6,225
  6,671
  7,136
  7,622
  8,129
  8,658
  9,211
  9,789
  10,394
  11,027
  11,689
  12,382
  13,109
  13,870
  14,668
  15,505
  16,382
  17,303
Retained Cash Flow (-), $m
  -789
  -688
  -715
  -746
  -778
  -810
  -843
  -877
  -911
  -947
  -984
  -1,023
  -1,063
  -1,106
  -1,150
  -1,197
  -1,247
  -1,299
  -1,354
  -1,412
  -1,473
  -1,538
  -1,606
  -1,678
  -1,753
  -1,833
  -1,918
  -2,006
  -2,100
  -2,198
  -2,302
Prev. year cash balance distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  2,000
  1,819
  2,074
  2,340
  2,619
  2,909
  3,213
  3,528
  3,857
  4,199
  4,363
  4,733
  5,119
  5,521
  5,939
  6,375
  6,830
  7,304
  7,799
  8,316
  8,856
  9,421
  10,011
  10,629
  11,276
  11,953
  12,662
  13,405
  14,184
  15,001
Discount rate, %
 
  8.40
  8.82
  9.26
  9.72
  10.21
  10.72
  11.26
  11.82
  12.41
  13.03
  13.68
  14.37
  15.09
  15.84
  16.63
  17.46
  18.34
  19.25
  20.22
  21.23
  22.29
  23.40
  24.57
  25.80
  27.09
  28.45
  29.87
  31.36
  32.93
  34.58
PV of cash for distribution, $m
 
  1,845
  1,536
  1,590
  1,614
  1,611
  1,579
  1,523
  1,444
  1,346
  1,234
  1,064
  945
  824
  705
  591
  485
  390
  307
  236
  177
  129
  92
  64
  43
  28
  18
  11
  6
  4
  2
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Constellation Brands, Inc., together with its subsidiaries, produces, imports, and markets beer, wine, and spirits in the United States, Canada, Mexico, New Zealand, and Italy. The company sells wine across various categories, including table wine, sparkling wine, and dessert wine. Its principal brands comprise Arbor Mist, Black Box, Blackstone, Clos du Bois, Estancia, Franciscan Estate, Inniskillin, Kim Crawford, Mark West, Mount Veeder, Nobilo, Ravenswood, Rex Goliath, Robert Mondavi, Ruffino, Simi, Toasted Head, Wild Horse, Black Velvet Canadian Whisky, and SVEDKA Vodka. The company offers its products to wholesale distributors, retailers, on-premise locations, and government alcohol beverage control agencies. Constellation Brands, Inc. was founded in 1945 and is headquartered in Victor, New York.

FINANCIAL RATIOS  of  Constellation Brands Cl A (STZ)

Valuation Ratios
P/E Ratio 32.7
Price to Sales 5.3
Price to Book 5.3
Price to Tangible Book
Price to Cash Flow 24.4
Price to Free Cash Flow 66
Growth Rates
Sales Growth Rate 8.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 23.9%
Cap. Spend. - 3 Yr. Gr. Rate 70.4%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 103.9%
Total Debt to Equity 123.2%
Interest Coverage 6
Management Effectiveness
Return On Assets 7.9%
Ret/ On Assets - 3 Yr. Avg. 11.8%
Return On Total Capital 7.6%
Ret/ On T. Cap. - 3 Yr. Avg. 11.9%
Return On Equity 17.1%
Return On Equity - 3 Yr. Avg. 27.4%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 46%
Gross Margin - 3 Yr. Avg. 43.7%
EBITDA Margin 31%
EBITDA Margin - 3 Yr. Avg. 38.1%
Operating Margin 26.9%
Oper. Margin - 3 Yr. Avg. 33.9%
Pre-Tax Margin 22.9%
Pre-Tax Margin - 3 Yr. Avg. 29.2%
Net Profit Margin 16.1%
Net Profit Margin - 3 Yr. Avg. 23.3%
Effective Tax Rate 29.3%
Eff/ Tax Rate - 3 Yr. Avg. 23.4%
Payout Ratio 22.9%

STZ stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the STZ stock intrinsic value calculation we used $6548 million for the last fiscal year's total revenue generated by Constellation Brands Cl A. The default revenue input number comes from 2016 income statement of Constellation Brands Cl A. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our STZ stock valuation model: a) initial revenue growth rate of 10.4% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 8.4%, whose default value for STZ is calculated based on our internal credit rating of Constellation Brands Cl A, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Constellation Brands Cl A.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of STZ stock the variable cost ratio is equal to 48.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $1651 million in the base year in the intrinsic value calculation for STZ stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 4% for Constellation Brands Cl A.

Corporate tax rate of 27% is the nominal tax rate for Constellation Brands Cl A. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the STZ stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for STZ are equal to 96.2%.

Life of production assets of 58.7 years is the average useful life of capital assets used in Constellation Brands Cl A operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for STZ is equal to 28.8%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $6560 million for Constellation Brands Cl A - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 195.656 million for Constellation Brands Cl A is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Constellation Brands Cl A at the current share price and the inputted number of shares is $33.9 billion.


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Stock chart of STZ Financial statements of STZ
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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