What Does the Canadian Boycott Mean for Constellation Brands Valuation in 2025?

Let’s talk about Constellation Brands and the big question on every investor’s mind right now: should you stick with this stock, buy more, or think about moving on? If you’ve been watching your portfolio, you probably noticed that shares have been on a roller coaster. In the past week alone, Constellation jumped 5.9%, which was a welcome rally after a rough patch. Over the past month, though, it’s down 7.1%. Looking further back, the numbers are a bit more sobering. Year to date, the stock is off by 36.9%, with a five-year loss of 17.9%.

So, what's going on here? External forces are at play. Headlines have pointed to a Canadian boycott of U.S. alcohol brands, and surveys show Americans are drinking less than ever before. Both of these factors weigh on investor optimism toward Constellation. At the same time, industry giants are exploring new growth opportunities in emerging spaces like cannabis beverages. All this activity means risk perceptions are shifting, and impacts like these have appeared in the stock’s longer-term performance.

You might be looking at these performance swings and wondering if investors are missing something, perhaps an undervalued opportunity beneath the headlines. To that end, we've run Constellation Brands through a battery of valuation checks. Out of six factors we use to assess if a stock is undervalued, Constellation meets two, giving it a valuation score of 2.

But what do these checks really tell us, and how do they compare to alternative ways to think about value? In the next section, we’ll break down each assessment and then explore what might be an even better approach to sizing up Constellation Brands’ true worth.

Constellation Brands scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Constellation Brands Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company’s true value by projecting its expected future cash flows and then discounting them back to today’s dollars, reflecting the time value of money. For Constellation Brands, the DCF model used here is a 2 Stage Free Cash Flow to Equity approach, based on analyst and internal projections.

At present, Constellation Brands generates about $1.9 Billion in Free Cash Flow. Analysts forecast that annual free cash flow will continue to rise, reaching $2.57 Billion by 2030. The first five years’ forecasts come from a range of analysts, while projections beyond that rely on analytical extrapolation by Simply Wall St and gradually slow the growth rate in subsequent years.

The DCF model consolidates these future cash flows into a single present value and arrives at an intrinsic fair value of $337.50 per share. Compared to the company’s current trading price, this suggests the stock is about 58.4% undervalued at the moment. This notable discount indicates there may be significant upside potential for investors who are willing to trust these long-term cash flow forecasts.

Result: UNDERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Constellation Brands.

Our Discounted Cash Flow (DCF) analysis suggests Constellation Brands is undervalued by 58.4%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Constellation Brands Price vs Sales (P/S)

The Price-to-Sales (P/S) ratio is the preferred multiple for valuing Constellation Brands. This metric is especially useful for profitable companies in industries like beverages, where revenue is a reliable indicator of business strength. Compared to earnings-based multiples, P/S is less distorted by unusual expenses or accounting decisions, providing a clear snapshot of how the market values each dollar of sales.

Growth expectations and risk play a major role in what qualifies as a "normal" or fair P/S ratio. Companies with faster-growing sales, stronger brands, or lower risk typically warrant higher multiples, while those with slower growth or greater challenges might trade at a discount.

Constellation Brands is currently trading at a P/S ratio of 2.46x. That is somewhat higher than both the beverage industry average of 2.17x and the peer group average of 1.87x. However, numbers alone do not tell the whole story. This is where the Simply Wall St "Fair Ratio" comes in, a proprietary benchmark that considers Constellation’s growth, profit margins, risk profile, industry, and market capitalization to set a personalized fair multiple. The fair ratio for Constellation Brands is calculated to be 2.29x.

Unlike broad industry comparisons, the Fair Ratio focuses on the specific factors that should influence Constellation’s valuation. This gives investors a more tailored view of whether they are paying a premium or getting a bargain, beyond what peer or industry averages suggest.

Comparing the current P/S of 2.46x with the Fair Ratio of 2.29x, the stock appears to be trading just slightly above its fair value. The difference, however, is marginal, less than 0.10, which suggests Constellation Brands is valued about right according to this approach.

Result: ABOUT RIGHT

PS ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Constellation Brands Narrative

Earlier we mentioned that there's an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is simply your story about a company, grounded in the assumptions you believe about its future, such as where revenue, earnings and margins are headed, and what the fair value should be. Narratives connect the dots between the company’s real-world challenges and opportunities, your financial forecasts, and the valuation that follows from them.

On the Simply Wall St platform, Narratives let you tap into this process with ease. Millions of investors use them on the Community page to see, create, and share tailored perspectives. Narratives empower you to decide if it's time to buy or sell by comparing the Fair Value your story produces with the current share price, and they dynamically update as new news, reports, or company developments come in.

For Constellation Brands, one Narrative might emphasize long-term margin gains from cost-saving restructures, supporting a higher price target as seen in optimistic analyst forecasts. Another Narrative may focus on shrinking beer demand and cautious outlooks, resulting in a much lower valuation. Narratives make it clear how investors can arrive at very different conclusions with the same data, and help you track which story matches reality as new information emerges.

Do you think there's more to the story for Constellation Brands? Create your own Narrative to let the Community know!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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