The stock of Anheuser-Busch InBev SA/NV (NYSE:BUD, 30-year Financials) gives every indication of being modestly undervalued, 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 $70.96 per share and the market cap of $140.7 billion, Anheuser-Busch InBev SA/NV stock shows every sign of being modestly undervalued. GF Value for Anheuser-Busch InBev SA/NV is shown in the chart below.
Because Anheuser-Busch InBev SA/NV is relatively undervalued, the long-term return of its stock is likely to be higher than its business growth, which is estimated to grow 1.29% annually over the next three to five years.
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Companies with poor financial strength offer investors a high risk of permanent capital loss. To avoid permanent capital loss, an investor must do their research and review a company's financial strength before deciding to purchase shares. Both the cash-to-debt ratio and interest coverage of a company are a great way to to understand its financial strength. Anheuser-Busch InBev SA/NV has a cash-to-debt ratio of 0.16, which which ranks worse than 79% of the companies in the industry of Beverages - Alcoholic. The overall financial strength of Anheuser-Busch InBev SA/NV is 4 out of 10, which indicates that the financial strength of Anheuser-Busch InBev SA/NV is poor. This is the debt and cash of Anheuser-Busch InBev SA/NV over the past years:
Investing in profitable companies carries less risk, especially in companies that have demonstrated consistent profitability over the long term. Typically, a company with high profit margins offers better performance potential than a company with low profit margins. Anheuser-Busch InBev SA/NV has been profitable 10 years over the past 10 years. During the past 12 months, the company had revenues of $46.9 billion and earnings of $0.679 a share. Its operating margin of 25.67% better than 88% of the companies in the industry of Beverages - Alcoholic. Overall, GuruFocus ranks Anheuser-Busch InBev SA/NV's profitability as fair. This is the revenue and net income of Anheuser-Busch InBev SA/NV over the past years:
Growth is probably the most important factor 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. The faster a company is growing, the more likely it is to be creating value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth rate of Anheuser-Busch InBev SA/NV is -5.5%, which ranks worse than 78% of the companies in the industry of Beverages - Alcoholic. The 3-year average EBITDA growth rate is -17.1%, which ranks worse than 83% 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, Anheuser-Busch InBev SA/NV's return on invested capital is 0.40, and its cost of capital is 6.53. The historical ROIC vs WACC comparison of Anheuser-Busch InBev SA/NV is shown below:
In short, the stock of Anheuser-Busch InBev SA/NV (NYSE:BUD, 30-year Financials) gives every indication of being modestly undervalued. The company's financial condition is poor and its profitability is fair. Its growth ranks worse than 83% of the companies in the industry of Beverages - Alcoholic. To learn more about Anheuser-Busch InBev SA/NV stock, you can check out its 30-year Financials here.
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