With Strong Cash Flow, Brown-Forman Stock Poised to Rise?

Brown-Forman (BF-B) could be a good pick for your portfolio, with its high cash yield, good fundamentals, and discounted valuation. Companies like this can use cash to fuel additional revenue growth, or simply pay their shareholders through dividends or buybacks. Either move makes them attractive to the market

What Is Happening With BF-B

BF-B may be down -1% so far this year but is now trading at P/S (Price-to-Sales) ratio that is at a meaningful discount to its 3-month and 2-year highs, and also belowits 3-year average.

The stock may not reflect it yet, but here is what’s going well for the company: Despite challenging U.S. market volumes, Brown-Forman launched Jack Daniel’s Tennessee Blackberry and is expanding New Mix RTD. Emerging markets and travel retail show growth. A 70% premium portfolio focus and U.S. distribution changes in 13 markets (August 2025) aim to drive sales. Full-year guidance remains reaffirmed.

BF-B Has Good Fundamentals

• Good Cash Yield: Not many stocks offer free cash flow yield of 5.0%, but Brown-Forman stock does
• Strong Margin: Last 12 month operating margin of 28.9%
• Growth: Last 12 revenue growth of -4.7% – revenue decline, but this selection is all about high yield and margin
• Valuation: BF-B stock currently trading at 55% below 2Y high, 16% below 1M high, and at a PS lower than 3Y average.

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 took some hits in past market meltdowns. It fell about 43% in the Dot-Com Bubble and nearly 40% during the Global Financial Crisis. The 2018 Correction wasn’t as bad, with a drop around 23%, but still significant. During the Covid Pandemic, the stock slid roughly 35%, and the Inflation Shock knocked it down just over 31%. Solid fundamentals matter, but BF-B’s history shows it’s not immune when markets sell off hard. 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. Campbell’s (CPB)
2. Vail Resorts (MTN)
3. Qualys (QLYS)

We chose these stocks using the following criteria:

1. Greater than $2 Bil in market cap
2. Dipped last month & meaningfully below 2Y high
3. Current P/S < last few year average
4. Strong operating margin with no instances of large margin collapse
5. High free cash flow yield

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 10.4% and 20.4% respectively
• Win rate (percentage of picks returning positive) of about 74% for 12-month period
• Strategy consistent across market cycles

A Multi Asset Portfolio Beats Picking Stocks Alone

Stocks can jump or crash but different assets move on different cycles. A multi asset portfolio helps you stay invested while cushioning swings in equities.

The asset allocation framework of Trefis’ Boston-based, wealth management partner yielded positive returns during the 2008-09 period when the S&P lost more than 40%. Our partner’ strategy now includes Trefis High Quality Portfolio, which 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