Memo #18: You're as smooth...as Tennessee Whiskey

Plus: Shari, Larry and Paramount

You’re as smooth… (as Tennessee Whiskey)

Brown-Forman: on why we’re not too worried

Bit of an overreaction to largely flat result — down 17%, trading at a forward P/E of 16x — what we think the market is missing here is the earnings quality of Brown-Forman has remained largely the same. Note the data sourced from Bloomberg below, and focus on the net income margin — it remains around ~20-23%:

In FY21 the market capitalisation of Brown-Forman was north of $36bn. It is now just under $13bn¹. Net income was $802mn in FY21 and net income for the twelve months ended April 2025 was $869mn. In other words, you can pay about one third of the price the market demanded in 2021 for the same earnings and the same “quality” (i.e. margin). If you liked Brown-Forman in 2021, logically you should like it three times as much today.