Constellation Brands, Inc.STZNYSE

Overview Intelligence Charts News Fundamentals Key Metrics TTM Financials Earnings Growth Rating Analysts Institutional Peers Historical

DCF Valuation

DCF Valuation Summary

Sell

Fair Value: $132.94 per share(market-calibrated)

-15.1%

Upside to Fair Value

Current

$156.56

Pure Model

$131.85

Fair Value

$132.94

Bull Case

$154.34

Bear Case

$109.43

Market Reality Check

Model Terminal Growth

2.50%

Market-Implied Growth

2.75%

Calibrated Growth

2.54%

Fair value uses 85% model / 15% market-implied terminal growth. Pure model: $131.85.

What's Driving This Ratingfor STZ

↓

CapEx normalizing toward maintenance

Historical CapEx is 10.60% of revenue (heavy investment phase). Model fades this to 3.00% by Year 10, freeing up ~$900M in annual FCF. This is the biggest driver of long-term cash flow improvement.

↑

Margin expansion modeled

Current EBIT margin is 15.94% — below the sector mature average of 35.45%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $1.9B (15.98% margin).

→

Moderate revenue growth

Analyst consensus projects -11.14% revenue growth, fading to 2.50% by Year 10. Revenue reaches $11.8B (vs $10.2B today).

✓

Model and market roughly agree

Market-implied terminal growth of 2.75% is close to the model's 2.50% (only 25bps apart). The DCF assumptions are well-aligned with how the market is pricing this stock.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 65.56% indicates efficient cash generation. FCF reaches $1.5B by Year 10 (12.90% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.44

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)6.48%

Cost of Debt

Pre-tax Cost of Debt3.27%

Tax Rate21.00%

After-tax Cost of Debt2.58%

Equity Weight (E/V)70.11%

Debt Weight (D/V)29.89%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (70.11% × 6.48%) + (29.89% × 2.58%)

= 5.50%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$9.1B	$9.3B	$10.2B	$10.9B	$11.8B
EBIT	$1.4B	$1.5B	$1.6B	$1.7B	$1.9B
Tax	$304M	$312M	$340M	$365M	$398M
NOPAT	$1.1B	$1.2B	$1.3B	$1.4B	$1.5B
+ Depreciation	$336M	$345M	$376M	$403M	$438M
- Capex	$961M	$830M	$734M	$603M	$355M
- Δ NWC	-$197M	$38M	$68M	$62M	$50M
Free Cash Flow	$713M	$650M	$853M	$1.1B	$1.5B
Discount Factor	0.948	0.852	0.765	0.687	0.585
Present Value	$676M	$553M	$653M	$765M	$895M

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$1.5B

Terminal Growth Rate2.50%

WACC5.50%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$52.2B

PV of Terminal Value$30.6B

Exit Multiple Method

Year 10 EBITDA$2.3B

Exit Multiple (EV/EBITDA)20.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$46.6B

PV of Terminal Value$27.3B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$7.0B

PV of Terminal Value$30.6B

Enterprise Value$37.6B

(-) Net Debt$12.0B

Equity Value$25.6B

Shares Outstanding181M

Price per Share$140.87

Exit Multiple Method

PV of Projected FCFs$7.0B

PV of Terminal Value$27.3B

Enterprise Value$34.3B

(-) Net Debt$12.0B

Equity Value$22.3B

Shares Outstanding181M

Price per Share$122.83

Pure Model Fair Value

$131.85

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	1.50%	2.00%	2.50%	3.00%	3.50%
3.50%	$219.72	$207.77	$196.38	$185.53	$175.20
4.50%	$149.15	$168.04	$196.38	$185.53	$175.20
5.50%	$110.18	$119.46	$131.85	$149.19	$175.20
6.50%	$84.29	$89.60	$96.24	$104.77	$116.15
7.50%	$65.26	$68.59	$72.59	$77.47	$83.57

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$109.43

-30.1% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 0.55

Base Case

$131.85

-15.8% vs current

• Analyst consensus
• Terminal growth: 2.5%
• Beta: 0.44

Bull Case

$154.34

-1.4% vs current

• +25% vs analyst consensus
• Terminal growth: 3.0%
• Beta: 0.37

Key Assumptions & Drivers✓ Using Analyst Consensus Estimates• Consumer Defensive Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth-11.14%

Year 3 Revenue Growth2.43%

Year 5 Revenue Growth4.04%

Year 7 Revenue Growth3.43%

Year 10 Revenue Growth2.50%

Terminal Growth Rate2.50%

Margin & Efficiency

Current EBIT Margin15.94%

Terminal EBIT Margin35.45%

Tax Rate21.00%

Historical Capex / Rev10.60%

Terminal Capex / Rev3.00%

NWC / Revenue17.30%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 20x EV/EBITDA (Consumer Defensive sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

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