Intrinsic value of Craft Brew Alliance - BREW

Previous Close

$16.70

  Intrinsic Value

$4.77

stock screener

  Rating & Target

str. sell

-71%

Previous close

$16.70

 
Intrinsic value

$4.77

 
Up/down potential

-71%

 
Rating

str. sell

We calculate the intrinsic value of BREW 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 0001), $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 0.3

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  2.10
  2.39
  2.65
  2.89
  3.10
  3.29
  3.46
  3.61
  3.75
  3.88
  3.99
  4.09
  4.18
  4.26
  4.34
  4.40
  4.46
  4.52
  4.56
  4.61
  4.65
  4.68
  4.71
  4.74
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
Revenue, $m
  212
  217
  223
  229
  236
  244
  252
  261
  271
  282
  293
  305
  318
  331
  346
  361
  377
  394
  412
  431
  451
  472
  494
  518
  543
  569
  596
  625
  655
  687
Variable operating expenses, $m
  42
  43
  44
  45
  46
  48
  49
  51
  53
  55
  53
  55
  58
  60
  63
  66
  68
  72
  75
  78
  82
  86
  90
  94
  99
  103
  108
  113
  119
  125
Fixed operating expenses, $m
  170
  173
  177
  181
  185
  189
  193
  198
  202
  206
  211
  216
  220
  225
  230
  235
  240
  246
  251
  257
  262
  268
  274
  280
  286
  292
  299
  305
  312
  319
Total operating expenses, $m
  212
  216
  221
  226
  231
  237
  242
  249
  255
  261
  264
  271
  278
  285
  293
  301
  308
  318
  326
  335
  344
  354
  364
  374
  385
  395
  407
  418
  431
  444
Operating income, $m
  0
  1
  2
  3
  5
  7
  10
  13
  17
  21
  29
  34
  40
  46
  53
  60
  68
  77
  86
  96
  107
  118
  131
  144
  158
  173
  189
  206
  224
  243
EBITDA, $m
  13
  14
  15
  17
  19
  21
  24
  28
  32
  37
  42
  48
  54
  61
  68
  76
  85
  94
  105
  115
  127
  140
  153
  167
  182
  198
  216
  234
  253
  274
Interest expense (income), $m
  1
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
Earnings before tax, $m
  -2
  -1
  0
  1
  3
  5
  7
  10
  14
  18
  26
  30
  36
  42
  48
  56
  63
  72
  81
  90
  101
  112
  124
  136
  150
  164
  180
  196
  214
  232
Tax expense, $m
  0
  0
  0
  0
  1
  1
  2
  3
  4
  5
  7
  8
  10
  11
  13
  15
  17
  19
  22
  24
  27
  30
  33
  37
  40
  44
  49
  53
  58
  63
Net income, $m
  -2
  -1
  0
  1
  2
  3
  5
  7
  10
  13
  19
  22
  26
  31
  35
  41
  46
  52
  59
  66
  73
  81
  90
  99
  109
  120
  131
  143
  156
  169

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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
Total assets, $m
  215
  220
  226
  232
  239
  247
  256
  265
  275
  285
  297
  309
  322
  336
  350
  366
  382
  399
  417
  437
  457
  478
  501
  525
  550
  576
  604
  633
  664
  696
Adjusted assets (=assets-cash), $m
  215
  220
  226
  232
  239
  247
  256
  265
  275
  285
  297
  309
  322
  336
  350
  366
  382
  399
  417
  437
  457
  478
  501
  525
  550
  576
  604
  633
  664
  696
Revenue / Adjusted assets
  0.986
  0.986
  0.987
  0.987
  0.987
  0.988
  0.984
  0.985
  0.985
  0.989
  0.987
  0.987
  0.988
  0.985
  0.989
  0.986
  0.987
  0.987
  0.988
  0.986
  0.987
  0.987
  0.986
  0.987
  0.987
  0.988
  0.987
  0.987
  0.986
  0.987
Average production assets, $m
  134
  137
  140
  145
  149
  154
  159
  165
  171
  178
  185
  192
  201
  209
  218
  228
  238
  249
  260
  272
  285
  298
  312
  327
  342
  359
  376
  394
  413
  433
Working capital, $m
  39
  40
  41
  42
  43
  45
  46
  48
  50
  52
  54
  56
  58
  61
  64
  66
  69
  73
  76
  79
  83
  87
  91
  95
  100
  105
  110
  115
  121
  126
Total debt, $m
  35
  37
  39
  42
  44
  47
  51
  54
  58
  62
  66
  71
  76
  81
  86
  92
  98
  105
  111
  119
  126
  134
  143
  152
  161
  171
  181
  192
  204
  216
Total liabilities, $m
  81
  83
  85
  87
  90
  93
  96
  100
  103
  107
  112
  116
  121
  126
  132
  137
  144
  150
  157
  164
  172
  180
  188
  197
  207
  217
  227
  238
  250
  262
Total equity, $m
  134
  137
  141
  145
  149
  154
  160
  165
  172
  178
  185
  193
  201
  209
  219
  228
  238
  249
  260
  272
  285
  299
  313
  327
  343
  359
  377
  395
  414
  434
Total liabilities and equity, $m
  215
  220
  226
  232
  239
  247
  256
  265
  275
  285
  297
  309
  322
  335
  351
  365
  382
  399
  417
  436
  457
  479
  501
  524
  550
  576
  604
  633
  664
  696
Debt-to-equity ratio
  0.260
  0.270
  0.280
  0.290
  0.300
  0.310
  0.320
  0.330
  0.340
  0.350
  0.360
  0.370
  0.380
  0.390
  0.390
  0.400
  0.410
  0.420
  0.430
  0.440
  0.440
  0.450
  0.460
  0.460
  0.470
  0.480
  0.480
  0.490
  0.490
  0.500
Adjusted equity ratio
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -2
  -1
  0
  1
  2
  3
  5
  7
  10
  13
  19
  22
  26
  31
  35
  41
  46
  52
  59
  66
  73
  81
  90
  99
  109
  120
  131
  143
  156
  169
Depreciation, amort., depletion, $m
  13
  13
  13
  14
  14
  14
  15
  15
  16
  16
  13
  14
  14
  15
  15
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  27
  28
  29
  31
Funds from operations, $m
  11
  12
  13
  14
  16
  18
  20
  23
  26
  29
  32
  36
  40
  45
  51
  57
  63
  70
  77
  85
  94
  103
  112
  123
  134
  145
  158
  171
  185
  200
Change in working capital, $m
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
Cash from operations, $m
  11
  11
  12
  13
  14
  16
  18
  21
  24
  27
  30
  34
  38
  43
  48
  54
  60
  67
  74
  82
  90
  99
  108
  118
  129
  141
  153
  166
  180
  194
Maintenance CAPEX, $m
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -29
New CAPEX, $m
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
Cash from investing activities, $m
  -12
  -12
  -14
  -14
  -14
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -28
  -29
  -30
  -32
  -33
  -35
  -37
  -39
  -40
  -42
  -45
  -47
  -49
Free cash flow, $m
  -2
  -2
  -1
  -1
  0
  1
  2
  4
  6
  8
  10
  13
  16
  20
  24
  29
  34
  39
  45
  51
  58
  65
  73
  81
  90
  100
  110
  121
  133
  145
Issuance/(repayment) of debt, $m
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  12
  12
Issuance/(repurchase) of shares, $m
  5
  4
  4
  3
  3
  2
  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  
  7
  6
  6
  5
  6
  5
  3
  3
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  12
  12
Total cash flow (excl. dividends), $m
  5
  5
  5
  5
  5
  5
  5
  7
  10
  12
  14
  18
  21
  25
  30
  35
  40
  46
  52
  58
  66
  73
  81
  90
  100
  110
  121
  132
  144
  157
Retained Cash Flow (-), $m
  -5
  -4
  -4
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
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
  0
  0
  1
  1
  1
  0
  0
  2
  3
  6
  7
  10
  13
  17
  21
  25
  30
  35
  40
  46
  53
  60
  67
  75
  84
  93
  103
  114
  125
  137
Discount rate, %
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
  0
  0
  1
  1
  0
  0
  0
  1
  2
  3
  3
  4
  5
  6
  6
  6
  6
  6
  6
  6
  5
  5
  4
  4
  3
  3
  2
  2
  1
  1
Current shareholders' claim on cash, %
  98.6
  97.3
  96.1
  95.2
  94.5
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1

Craft Brew Alliance, Inc. is a craft brewing company that is engaged in brewing, branding and bringing to market American craft beers. The Company operates through two segments: Beer Related operations, which include the brewing operations and related domestic and international beer and cider sales of its Kona, Widmer Brothers, Redhook and Omission beer brands, and Square Mile cider brand, and Pubs operations, which include its approximately five pubs, over four of which are located adjacent to its Beer Related operations, as well as other merchandise sales, and sales of its beers directly to customers. The Company's portfolio of brands includes the Kona Brewing Company, Widmer Brothers Brewing, Redhook Brewery, Omission Beer and Square Mile Cider Company brand families, along with partner brands Appalachian Mountain Brewery, Cisco Brewers and Resignation Brewery. Its brews its beers using hops, malted barley, wheat, rye and other natural traditional and nontraditional ingredients.

FINANCIAL RATIOS  of  Craft Brew Alliance (BREW)

Valuation Ratios
P/E Ratio 0
Price to Sales 1.6
Price to Book 2.7
Price to Tangible Book
Price to Cash Flow 45.9
Price to Free Cash Flow -35.7
Growth Rates
Sales Growth Rate -0.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate 9.9%
Financial Strength
Quick Ratio 0
Current Ratio 0.1
LT Debt to Equity 23.3%
Total Debt to Equity 24.2%
Interest Coverage 1
Management Effectiveness
Return On Assets 0.5%
Ret/ On Assets - 3 Yr. Avg. 1.3%
Return On Total Capital 0%
Ret/ On T. Cap. - 3 Yr. Avg. 1.3%
Return On Equity 0%
Return On Equity - 3 Yr. Avg. 1.5%
Asset Turnover 1
Profitability Ratios
Gross Margin 29.6%
Gross Margin - 3 Yr. Avg. 29.8%
EBITDA Margin 5.9%
EBITDA Margin - 3 Yr. Avg. 6.9%
Operating Margin 0.5%
Oper. Margin - 3 Yr. Avg. 1.8%
Pre-Tax Margin 0%
Pre-Tax Margin - 3 Yr. Avg. 1.5%
Net Profit Margin 0%
Net Profit Margin - 3 Yr. Avg. 0.8%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 30%
Payout Ratio 0%

BREW stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the BREW stock intrinsic value calculation we used $207.456 million for the last fiscal year's total revenue generated by Craft Brew Alliance. The default revenue input number comes from 0001 income statement of Craft Brew Alliance. 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 BREW stock valuation model: a) initial revenue growth rate of 2.1% 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 4.3%, whose default value for BREW is calculated based on our internal credit rating of Craft Brew Alliance, 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 Craft Brew Alliance.
    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 BREW stock the variable cost ratio is equal to 19.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $166 million in the base year in the intrinsic value calculation for BREW 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 5.4% for Craft Brew Alliance.

Corporate tax rate of 27% is the nominal tax rate for Craft Brew Alliance. 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 BREW 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 BREW are equal to 63.1%.

Life of production assets of 14.1 years is the average useful life of capital assets used in Craft Brew Alliance 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 BREW is equal to 18.4%. 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 - $130.791 million for Craft Brew Alliance - 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 19.257 million for Craft Brew Alliance 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 Craft Brew Alliance at the current share price and the inputted number of shares is $0.3 billion.

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COMPANY NEWS

▶ Craft Brew Alliance: 3Q Earnings Snapshot   [Nov-07-18 05:27PM  Associated Press]
▶ How was Cisco's beer business acquired? It's a whale of a tale.   [06:40AM  American City Business Journals]
▶ Craft Brew Alliance acquires Miami's first brewery   [Oct-11-18 02:03PM  American City Business Journals]
▶ For Widmer's parent, a three-brand purchase that takes the company east   [10:01AM  American City Business Journals]
▶ Top 4 Beer Stocks for 2018   [Sep-17-18 09:22AM  Investopedia]
▶ 3 Top Small-Cap Stocks to Buy Right Now   [Aug-23-18 03:21PM  Motley Fool]
▶ Here are the Portland stocks driving Wall Street's latest bull run (Photos)   [Aug-22-18 05:29PM  American City Business Journals]
▶ Is Craft Brew Alliance the Craft Brewer to Watch?   [Aug-20-18 08:10AM  Motley Fool]
▶ Craft Brew Alliance: 2Q Earnings Snapshot   [Aug-08-18 04:49PM  Associated Press]
▶ Craft Brew Alliance Announces Departure Of CFO   [Jun-20-18 04:00PM  Business Wire]
▶ Craft Brew Alliance Announces New Board Member   [Jun-19-18 04:01PM  Business Wire]
▶ How to Invest in Craft Beer   [Jun-11-18 09:43PM  Motley Fool]
▶ Craft Brew Alliance: 1Q Earnings Snapshot   [May-09-18 04:40PM  Associated Press]
▶ 10 Risky (But Rewarding) Small-Cap Stocks to Buy Now   [Apr-27-18 12:36PM  InvestorPlace]
▶ [$$] Craft Beer Turns Out to Be a Big Business   [Apr-01-18 11:38PM  The Wall Street Journal]
▶ [$$] 'Craft' Beer Turns Out to Be a Big Business   [01:49PM  The Wall Street Journal]
▶ Craft Brew Alliance to Host Earnings Call   [Mar-08-18 09:50AM  ACCESSWIRE]
▶ Craft Brew Alliance posts 4Q profit   [Mar-07-18 04:19PM  Associated Press]
▶ Should Anheuser-Busch InBev Buy Craft Brew Alliance?   [Feb-16-18 04:12PM  Motley Fool]
▶ 5 Consumer Staples Stocks Set to Beat Earnings This Season   [Jan-22-18 11:40AM  InvestorPlace]
▶ How to Invest in the Beer Industry   [Dec-01-17 02:09PM  Motley Fool]
▶ Top 4 Beer Stocks for 2017   [Nov-10-17 02:50PM  Investopedia]
▶ Craft Brew Alliance posts 3Q profit   [Nov-08-17 06:19PM  Associated Press]

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