The stock of Molson Coors Beverage Co (NYSE:TAP, 30-year Financials) is estimated to be fairly valued, 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 $50.36 per share and the market cap of $10.9 billion, Molson Coors Beverage Co stock appears to be fairly valued. GF Value for Molson Coors Beverage Co is shown in the chart below.
Because Molson Coors Beverage Co is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth.
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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 87% 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:
It is less risky to invest in profitable companies, especially those with consistent profitability over long term. A company with high profit margins is usually a safer investment than those with low 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:
Growth is probably one of the most important factors in the valuation of a company. GuruFocus’ research has found that growth is closely correlated with the long-term performance of a company’s stock. If a company’s business is growing, the company usually creates value for its shareholders, especially if the growth is profitable. Likewise, if a company's revenue and earnings are declining, the value of the company will decrease. Molson Coors Beverage Co’s 3-year average revenue growth rate is worse than 68% of the companies in the industry of Beverages - Alcoholic. Molson Coors Beverage Co’s 3-year average EBITDA growth rate is -39.9%, which ranks in the bottom 10% of the companies in the industry of Beverages - Alcoholic.
Another way to look at the profitability of a company is to compare its return on invested capital and the weighted cost of capital. 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. We want to have the return on invested capital higher than the weighted cost of capital. For the past 12 months, Molson Coors Beverage Co’s return on invested capital is 11.86, and its cost of capital is 6.00. The historical ROIC vs WACC comparison of Molson Coors Beverage Co is shown below:
To conclude, Molson Coors Beverage Co (NYSE:TAP, 30-year Financials) stock appears to be fairly valued. 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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