Has Brown-Forman Stock Quietly Become a Value Opportunity?

We think Brown-Forman (BF-B) stock could be a good value buy. It is currently trading lower than average valuation, and has strong margins to go with its modest valuation.

Buying stocks with low valuations or trading well below their peaks but maintaining strong margins allows investors to capture mean reversion and valuation re-rating potential. The downside risk is potentially less because high-margin businesses can sustain earnings and recover faster when sentiment or market conditions improve

What Is Happening With BF-B

BF-B may be down -22% so far this year but is now 35% cheaper based on its P/S (Price-to-Sales) ratio compared to 1 year ago, and also trades at a P/E (Price-to-Earnings) ratio that is below S&P 500 median.

The stock may not reflect it yet, but here is what’s going well for the company. Strong pricing for premium brands like Jack Daniel’s and Tequila Herradura, alongside a favorable product mix from successful ready-to-drink offerings and emerging market growth, supports strong profitability. While some developed markets faced volume headwinds and distributor inventory adjustments, new product launches and focused expansion offer avenues for future revenue improvement. Shares are discounted, likely reflecting this short-term volume softness and cautious FY26 guidance.

BF-B Has Strong Margin Play

• Revenue Growth: -3.5% LTM and -0.6% last 3 year average. Not ideal, but this is a margin and value play.
• Strong Margin: Nearly 27.4% 3-year average operating margin.
• No Major Margin Shock: Brown-Forman has avoided any large margin collapse in the last 12 months.
• Modest Valuation: Despite encouraging fundamentals, BF-B stock trades at a PE multiple of 16.1

Below is a quick comparison of BF-B fundamentals with S&P medians.

*LTM: Last Twelve Months

But What Is The Risk Involved?

While BF-B stock may be a compelling investment opportunity, it’s always helpful to be aware of a stock’s history of drawdown. BF-B fell 43% in the Dot-Com crash, nearly 40% during the Global Financial Crisis, and about 32% in the inflation shock. The Covid sell-off hit it for 35%, while the 2018 correction pulled it down around 23%. Solid fundamentals matter, but these numbers show how even strong stocks can take a big hit when the market turns sour. But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read BF-B Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

For more details and our view, see Buy or Sell BF-B Stock.

Stocks Like BF-B

Not ready to act on BF-B? Consider these alternatives:

1. Accenture (ACN)
2. Adobe (ADBE)
3. PayPal (PYPL)

We chose these stocks using the following criteria:

1. Greater than $2 Bil in market cap
2. Meaningfully below 1Y high
3. Current P/S < last few year average
4. Strong operating margin
5. P/E ratio below S&P 500 median

A portfolio of stocks with the criteria above would have performed has follows since 12/31/2016:

• Average 6-month and 12-month forward returns of 12.7% and 25.8% respectively
• Win rate (percentage of picks returning positive) of > 70% for both 6-month and 12-month periods
• Strategy consistent across market cycles

The Best Investors Think In Portfolios

Individual stocks are unpredictable. A smart portfolio keeps you invested, limits downside shocks, and provides upside exposure

The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – the S&P 500, S&P mid-cap, and Russell 2000 indices. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.