The stock of Molson Coors Beverage Co (NYSE:TAP, 30-year Financials) gives every indication of being modestly overvalued, according to GuruFocus Value calculation. GuruFocus Value is GuruFocus' estimate of the fair value at which the stock should be traded. It is calculated based on the historical multiples that the stock has traded at, the past business growth and analyst estimates of future business performance. If the price of a stock is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher. At its current price of $60.66 per share and the market cap of $13.2 billion, Molson Coors Beverage Co stock shows every sign of being modestly overvalued. GF Value for Molson Coors Beverage Co is shown in the chart below.
Because Molson Coors Beverage Co is relatively overvalued, the long-term return of its stock is likely to be lower than its business growth.
Investing in companies with poor financial strength has a higher risk of permanent loss of capital. Thus, it is important to carefully review the financial strength of a company before deciding whether to buy its stock. Looking at the cash-to-debt ratio and interest coverage is a great starting point for understanding the financial strength of a company. Molson Coors Beverage Co has a cash-to-debt ratio of 0.07, which is worse than 89% of the companies in the industry of Beverages - Alcoholic. GuruFocus ranks the overall financial strength of Molson Coors Beverage Co at 4 out of 10, which indicates that the financial strength of Molson Coors Beverage Co is poor. This is the debt and cash of Molson Coors Beverage Co over the past years:
Companies that have been consistently profitable over the long term offer less risk for investors who may want to purchase shares. Higher profit margins usually dictate a better investment compared to a company with lower profit margins. Molson Coors Beverage Co has been profitable 9 over the past 10 years. Over the past twelve months, the company had a revenue of $9.4 billion and loss of $3.45 a share. Its operating margin is 16.14%, which ranks better than 72% of the companies in the industry of Beverages - Alcoholic. Overall, the profitability of Molson Coors Beverage Co is ranked 7 out of 10, which indicates fair profitability. This is the revenue and net income of Molson Coors Beverage Co over the past years:
One of the most important factors in the valuation of a company is growth. Long-term stock performance is closely correlated with growth according to GuruFocus research. Companies that grow faster create more value for shareholders, especially if that growth is profitable. The average annual revenue growth of Molson Coors Beverage Co is -4.3%, which ranks worse than 70% of the companies in the industry of Beverages - Alcoholic. The 3-year average EBITDA growth is -39.9%, which ranks in the bottom 10% of the companies in the industry of Beverages - Alcoholic.
One can also evaluate a company's profitability by comparing its return on invested capital (ROIC) to its weighted average cost of capital (WACC). Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. If the return on invested capital exceeds the weighted average cost of capital, the company is likely creating value for its shareholders. During the past 12 months, Molson Coors Beverage Co's ROIC is 11.86 while its WACC came in at 6.42. The historical ROIC vs WACC comparison of Molson Coors Beverage Co is shown below:
To conclude, the stock of Molson Coors Beverage Co (NYSE:TAP, 30-year Financials) is estimated to be modestly overvalued. The company's financial condition is poor and its profitability is fair. Its growth ranks in the bottom 10% of the companies in the industry of Beverages - Alcoholic. To learn more about Molson Coors Beverage Co stock, you can check out its 30-year Financials here.
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