Considering Brown Forman's profitability and operating efficiency indicators, Brown Forman may not be well positioned to generate adequate gross income at this time. It has a very high probability of underperforming in December. Profitability indicators assess Brown Forman's ability to earn profits and add value for shareholders.
For Brown Forman profitability analysis, we use financial ratios and fundamental drivers that measure the ability of Brown Forman to generate income relative to revenue, assets, operating costs, and current equity. These fundamental indicators attest to how well Brown Forman utilizes its assets to generate profit and value for its shareholders. The profitability module also shows relationships between Brown Forman's most relevant fundamental drivers. It provides multiple suggestions of what could affect the performance of Brown Forman over time as well as its relative position and ranking within its peers.
Please note, there is a significant difference between Brown Forman's value and its price as these two are different measures arrived at by different means. Investors typically determine if Brown Forman is a good investment by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, Brown Forman's price is the amount at which it trades on the open market and represents the number that a seller and buyer find agreeable to each party.
Brown Forman Operating Margin vs. Profit Margin Fundamental Analysis
Comparative valuation techniques use various fundamental indicators to help in determining Brown Forman's current stock value. Our valuation model uses many indicators to compare Brown Forman value to that of its competitors to determine the firm's financial worth.
Brown Forman is rated third in profit margin category among its peers. It is rated fourth in operating margin category among its peers reporting about 1.24 of Operating Margin per Profit Margin. At present, Brown Forman's Net Profit Margin is projected to increase slightly based on the last few years of reporting. The reason why the comparable model can be used in almost all circumstances is due to the vast number of multiples that can be utilized, such as the price-to-earnings (P/E), price-to-book (P/B), price-to-sales (P/S), price-to-cash flow (P/CF), and many others. The P/E ratio is the most commonly used of these ratios because it focuses on the Brown Forman's earnings, one of the primary drivers of an investment's value.
Brown Operating Margin vs. Profit Margin
Profit Margin measures overall efficiency of a company and shows its ability to withstand competition as well as defend against adverse conditions such as rising costs, falling prices, decline in sales or management distress. Profit margin tells investors how well the company executes on its overall pricing strategies as well as how effective the company in controlling its costs.
Brown Forman
Profit Margin
=
Net Income
Revenue
X
100
=
0.24 %
In a nutshell, Profit Margin indicator shows the amount of money the company makes from total sales or revenue. It can provide a good insight into companies in the same sector, as well as help to identify trends of a company from year to year.
Operating Margin shows how much operating income a company makes on each dollar of sales. It is one of the profitability indicators which helps analysts to understand whether the firm is successful or not making money from everyday operations.
Brown Forman
Operating Margin
=
Operating Income
Revenue
X
100
=
0.30 %
A good Operating Margin is required for a company to be able to pay for its fixed costs or payout its debt, which implies that the higher the margin, the better. This ratio is most effective in evaluating the earning potential of a company over time when comparing it against a firm's competitors.
Brown Operating Margin Comparison
Brown Forman is currently under evaluation in operating margin category among its peers.
Brown Forman Profitability Projections
The most important aspect of a successful company is its ability to generate a profit. For investors in Brown Forman, profitability is also one of the essential criteria for including it into their portfolios because, without profit, Brown Forman will eventually generate negative long term returns. The profitability progress is the general direction of Brown Forman's change in net profit over the period of time. It can combine multiple indicators of Brown Forman, where stable trends show no significant progress. An accelerating trend is seen as positive, while a decreasing one is unfavorable. A rising trend means that profits are rising, and operational efficiency may be rising as well. A decreasing trend is a sign of poor performance and may indicate upcoming losses.
Profitability drivers are factors that can directly affect your investment outlook on Brown Forman. Investors often realize that things won't turn out the way they predict. There are maybe way too many unforeseen events and contingencies during the holding period of Brown Forman position where the market behavior may be hard to predict, tax policy changes, gold or oil price hikes, calamities change, and many others. The question is, are you prepared for these unexpected events? Although some of these situations are obviously beyond your control, you can still follow the important profit indicators to know where you should focus on when things like this occur. Below are some of the Brown Forman's important profitability drivers and their relationship over time.
One of the main advantages of trading using pair correlations is that every trade hedges away some risk. Because there are two separate transactions required, even if Brown Forman position performs unexpectedly, the other equity can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Brown Forman will appreciate offsetting losses from the drop in the long position's value.
Brown Forman Pair Trading
Brown Forman Pair Trading Analysis
The ability to find closely correlated positions to Brown Forman could be a great tool in your tax-loss harvesting strategies, allowing investors a quick way to find a similar-enough asset to replace Brown Forman when you sell it. If you don't do this, your portfolio allocation will be skewed against your target asset allocation. So, investors can't just sell and buy back Brown Forman - that would be a violation of the tax code under the "wash sale" rule, and this is why you need to find a similar enough asset and use the proceeds from selling Brown Forman to buy it.
The correlation of Brown Forman is a statistical measure of how it moves in relation to other instruments. This measure is expressed in what is known as the correlation coefficient, which ranges between -1 and +1. A perfect positive correlation (i.e., a correlation coefficient of +1) implies that as Brown Forman moves, either up or down, the other security will move in the same direction. Alternatively, perfect negative correlation means that if Brown Forman moves in either direction, the perfectly negatively correlated security will move in the opposite direction. If the correlation is 0, the equities are not correlated; they are entirely random. A correlation greater than 0.8 is generally described as strong, whereas a correlation less than 0.5 is generally considered weak.
Correlation analysis and pair trading evaluation for Brown Forman can also be used as hedging techniques within a particular sector or industry or even over random equities to generate a better risk-adjusted return on your portfolios.
Use Investing Themes to Complement your Brown Forman position
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Gambling
Companies that are related to providing gambling services across multiple geographical areas by investing, exploring, or producing software, hardware, and related infrastructure for running gambling operations or trading speculative assets. The Gambling theme has 38 constituents at this time.
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To fully project Brown Forman's future profitability, investors should examine all historical financial statements. These statements provide investors with a comprehensive snapshot of the financial position of Brown Forman at a specified time, usually calculated after every quarter, six months, or one year. Three primary documents fall into the category of financial statements. These documents include Brown Forman's income statement, its balance sheet, and the statement of cash flows.
Potential Brown Forman investors and stakeholders can use historical trends found within financial statements to determine how well the company is positioned for the future. Although Brown Forman investors may work on each financial statement separately, they are all related. The changes in Brown Forman's assets and liabilities, for example, are also reflected in the revenues and expenses that we see on Brown Forman's income statement, which results in the company's gains or losses. Cash flows can provide more information regarding cash listed on a balance sheet but not equivalent to net income shown on the income statement. Please read more on our technical analysis and fundamental analysis pages.
