Recently, we discovered an insightful bullish thesis on Constellation Brands, Inc. by Justin on Slo Capital’s Substack. In this article, we’ll distill the key aspects of the bullish perspective on STZ. As of September 18th, the shares of Constellation Brands were trading at $133.02, with trailing and forward P/E ratios at 18.50 and 11.38, respectively, according to Yahoo Finance.
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Constellation Brands (STZ), known for its ownership of renowned brands such as Corona, Modelo, and Pacifico, along with a selective assortment of wines and spirits, is currently situated at its most historically attractive valuation, with an EV/EBIT multiple around 10.5x. This level is even lower than those seen during the 2008/09 financial downturn, offering a rare chance to invest in a stable and high-quality business at a notably depressed valuation.
The strength of Constellation’s business model is rooted in its brand power and extensive distribution capabilities. Legendary brands like Modelo have ingrained themselves in consumer culture, fostering a loyalty that competitors find challenging to replicate. Additionally, Constellation’s efficient North American distribution network enhances this competitive edge by controlling valuable shelf space in grocery stores and ensuring accessibility in bars—key assets fiercely defended.
The observed discrepancy in valuation appears to stem from short-term concerns regarding consumer spending habits, weight-loss trends, and debt levels. Despite these worries, the company has consistently delivered resilient margins, strong free cash flow, and a robust balance sheet. Growth drivers include Modelo’s ascendance as America’s leading beer brand, ongoing premiumization trends within the alcohol sector, a judicious approach to wine and spirits portfolio management, and the international expansion of Mexican beer brands. Free cash flow projections for FY2024 stand at $2.3 billion, with expectations of mid-single-digit growth in beer and improved margins in the wine and spirits segment.
Employing a conservative valuation methodology, akin to that of Warren Buffett, using a 10% discount rate could suggest an intrinsic equity value of approximately $36 billion, closely aligning with the current market capitalization of about $42–43 billion. If growth trends improve, intrinsic value estimates could exceed $50 billion, presenting a margin of safety of 20–25%.
Constellation Brands’ blend of enduring brands, resilient distribution network, and international growth prospects—which are currently undervalued by the market—creates a compelling risk/reward scenario for investors. Although short-term uncertainties persist, the company’s significant competitive advantages, prudent management, and reliable cash flow render it an attractive opportunity for long-term investment.
In a previous discourse, we mentioned a bullish thesis on Constellation Brands, Inc. (STZ) presented by RepresentativeAd4940 in March 2025. This highlighted the company’s market-leading beer brands, unwavering brand loyalty, resilient cash flow position, and attractive valuation following one-off impairments. Since then, STZ’s stock has observed an approximate decline of 25%, influenced by short-term market apprehensions. However, the overarching thesis remains intact, with the company’s competitive moat and financial resilience firmly in place. Justin’s perspective echoes this optimism, accentuating the historically low EV/EBIT multiples, momentum in brand performance, and potential for global expansion.
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