Is Brown-Forman Finally Undervalued Despite Prolonged Weakness?

Brown-Forman (BF.B) has long been a subject of debate among investors, with its stock price experiencing a 52.5% decline from December 2022 to December 2025. While the company's revenue growth has stagnated-contracting by 3.5% in the trailing twelve months (LTM) and averaging -0.6% annually over the past three years-its valuation metrics now appear to diverge sharply from historical norms and industry benchmarks. This raises a critical question: Is Brown-Forman finally undervalued, or is the market simply pricing in structural challenges?

Valuation Metrics: A Tale of Contrasts

Brown-Forman's current price-to-earnings (P/E) ratio of 16.86 as of December 2025 is a stark departure from its 10-year average of 31.28 and 5-year average of 32.06. This implies the stock trades at roughly half its historical valuation, even as the company maintains a robust operating margin of 29% according to data. Similarly, its enterprise value-to-EBITDA (EV/EBITDA) ratio of 12.55 as of August 2025 is 11.22% below its 12-month average and 20.19% below its 5-year average. These metrics suggest a significant discount relative to both time and peers.

Comparisons with industry peers further highlight this divergence. Brown-Forman's P/E ratio of 17.78 according to reports is lower than the Consumer Defensive sector average of 20.63 and Constellation Brands' (STZ) 20.61 according to data. Its price-to-book (P/B) ratio of 3.46 according to market analysis also sits above Molson Coors' (TAP) 0.85 according to data but below Constellation Brands' 3.08 according to market research. While the P/B ratio is not a direct indicator of undervaluation, the broader context of its P/E and EV/EBITDA ratios suggests the market is pricing in pessimism about growth, despite the company's strong profitability.

Profitability vs. Growth: A Double-Edged Sword

Brown-Forman's operating margin of 29% according to financial data is a testament to its operational efficiency, particularly in a sector where margins often hover below 20%. However, this strength is offset by weak revenue growth. The company's LTM revenue fell by 3.5%, and its three-year average growth rate of -0.6% underscores a lack of momentum. For investors accustomed to high-growth narratives, this stagnation may justify the current valuation. Yet, in a market increasingly favoring stable, cash-generative businesses, Brown-Forman's margins could become a compelling argument for re-rating.

Market Sentiment Shifts: From Disregard to Reassessment

The stock's performance in late 2025 offers clues about shifting sentiment. Between June and December 2025, Brown-Forman's P/E ratio surged by 29.8%, contributing to a 10.7% rise in its stock price. This suggests that some investors are beginning to view the company's valuation as attractive, particularly in a macroeconomic environment where defensive stocks are gaining traction. Conversely, the 16.1% drop in its P/E multiple from December 2024 to December 2025 according to data reflects lingering skepticism about its ability to adapt to changing consumer preferences and competitive pressures.

The Case for Undervaluation

Despite the challenges, several factors argue for undervaluation. First, Brown-Forman's P/E and EV/EBITDA ratios are historically low, even as its profitability remains intact. Second, its valuation is cheaper than key peers like Constellation Brands and Boston Beer, which trade at higher multiples despite comparable or weaker financial performance. Finally, the company's brand portfolio-anchored by Jack Daniel's and premium spirits-offers long-term resilience in a sector where premiumization trends are gaining momentum.

Conclusion: A Calculated Bet

Brown-Forman's current valuation appears to reflect a market that has overcorrected for its growth challenges. While the company's revenue stagnation is a valid concern, its strong margins and competitive positioning in the premium spirits segment suggest the stock is undervalued relative to its intrinsic qualities. For long-term investors, the key question is whether the market will eventually recognize this disconnect-or if the company can catalyze growth through innovation or strategic acquisitions. Until then, Brown-Forman remains a compelling case study in the interplay between valuation, sentiment, and sector dynamics.