Evaluating Molson Coors After a 24% Slide and Shifting Beverage Industry Trends

• Ever wondered if Molson Coors Beverage is a hidden value waiting to be uncovered, or if there are better spots for your investment dollar? Let's dig in together and see what the numbers and recent news suggest.
• The stock has seen some turbulence lately, dropping 4.5% over the past week and 6.8% in the past month. Its year-to-date slide of 24.4% might have caught your eye, especially considering its longer-term five-year return stands at 19.4%.
• Recent headlines have swirled around shifting consumer tastes and competition within the beverage industry, impacting big brands like Molson Coors. Partnerships, new product launches, and an ongoing focus on premiumizing the portfolio have been front and center as the company fights to maintain market share.
• If you like the sound of undervalued opportunities, check this out: Molson Coors scores a perfect 6 out of 6 on our valuation checks. We will break down what that means using several valuation methods, but stick around to the end for an even more insightful approach to judging value.

Find out why Molson Coors Beverage's -19.8% return over the last year is lagging behind its peers.

Approach 1: Molson Coors Beverage Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow (DCF) model estimates a company's intrinsic value by projecting its future cash flows and discounting them back to the present. This process helps investors understand what a business is worth today based on its expected ability to generate cash in the future.

For Molson Coors Beverage, the most recent full year saw Free Cash Flow (FCF) of $981 million. Analyst estimates project FCF growing over the coming years, reaching about $1.32 billion by 2029. Although analyst forecasts typically extend only five years, further projections are extrapolated to account for long-term trends, providing a more complete picture of potential growth.

Based on these forward-looking cash flow estimates, the DCF analysis calculates an estimated intrinsic value of $158.19 per share. With the stock currently trading at a significant discount, the DCF model suggests Molson Coors shares are undervalued by 72.7%.

This level of undervaluation suggests that the market may be underestimating Molson Coors' ability to generate cash over time.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Molson Coors Beverage is undervalued by 72.7%. Track this in your watchlist or portfolio, or discover 841 more undervalued stocks based on cash flows.

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

Approach 2: Molson Coors Beverage Price vs Earnings

The price-to-earnings (PE) ratio is a widely used valuation metric for profitable companies like Molson Coors Beverage because it directly ties the company's stock price to its current earnings power. This helps investors quickly assess how much they are paying for each dollar of current profit.

It is important to note that a "normal" or "fair" PE ratio for any business is influenced by expectations for future growth and the perceived risk of those earnings. Faster-growing or more stable companies typically command higher PE ratios, while slower growth or higher risk tends to result in lower multiples.

Molson Coors is currently trading at a PE ratio of 8.2x. This compares quite favorably to both the industry average of 17.7x for Beverage companies and a peer group average of 16.1x. On the surface, this lower PE could indicate an attractive value if the company's prospects are similar to its competitors.

However, Simply Wall St goes further with its proprietary Fair Ratio model. The Fair PE Ratio for Molson Coors is calculated as 13.6x, factoring in detailed elements beyond simple industry averages, such as the company's future earnings growth outlook, risk factors, profit margins, and market capitalization. This approach provides a more nuanced and individualized benchmark, ensuring that the comparison is realistic for the company’s unique situation.

Since Molson Coors' actual PE ratio (8.2x) is meaningfully below its Fair Ratio (13.6x), this suggests the shares are undervalued on an earnings multiple basis.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1411 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Molson Coors Beverage Narrative

Earlier we mentioned that there is an even better way to understand valuation. Let us introduce you to Narratives. A Narrative is simply your story, your perspective on how you believe a company like Molson Coors Beverage will perform in the future, based on your assumptions about its fair value, upcoming revenue, earnings, and profit margins.

This approach connects a company’s unique context and future prospects to a specific financial forecast, and then calculates a fair value grounded in those beliefs. Narratives are designed to be accessible and intuitive, and you can create and compare them directly on Simply Wall St’s Community page, alongside the millions of other investors who use the platform.

Narratives give investors a dynamic and actionable tool, helping you decide when to buy or sell by comparing a company’s Fair Value, as generated by your assumptions, to the current share price. More powerfully, Narratives are updated automatically whenever new earnings, news, or industry changes come to light, so your view stays current.

For example, some Molson Coors investors may build a Narrative that expects aggressive growth in premium beverages and global expansion, supporting a fair value as high as $72 per share. Others may focus on ongoing industry headwinds and project a much lower value, around $42, highlighting how multiple perspectives on the same business lead to very different conclusions.

Do you think there's more to the story for Molson Coors Beverage? Head over to our Community to see what others are saying!

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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