$16.02
$32.70
bear $16.02
base $25.14
bull $32.70
margin of safety $16.00
market price* $29.46
Brown-Forman is a premium spirits company built around Jack Daniel's, with Woodford Reserve, el Jimador tequila, New Mix, Gin Mare, Diplomatico and other brands. In the fiscal year ended April 30, 2026, net sales were $3,928 million: about 42% from the United States ($1,649 million) and about 28% from developed international markets ($1,095 million, led by Germany, Australia, the United Kingdom, France and Spain), with the rest from emerging markets such as Mexico, Poland, Brazil and Turkiye, plus travel retail. Sales have fallen three years in a row from a peak of $4,228 million in fiscal 2023, and U.S. net sales dropped from $1,889 million to $1,765 million to $1,649 million over the last two years as consumers pulled back from whiskey. In March 2025 several Canadian provinces removed Jack Daniel's and other American spirits from shelves in response to U.S. tariffs, and the filing says tariff rates remain historically high. How we measured earnings. We start from operating cash flow, subtract stock compensation and the part of capital spending needed to keep the business running, and set aside swings in working capital. On that basis owner earnings per diluted share for fiscal 2017 through 2026 ranged from $1.26 to $1.83; they were $1.38 in fiscal 2024, $1.39 in fiscal 2025 and $1.67 in fiscal 2026. Because we value the business first and subtract debt afterwards, we then add back cash interest paid ($101 million in fiscal 2026), which gives cash flow of $1.89 per share for fiscal 2026. The starting level for the valuation is the median of the ten years, $1.75 per share (about $817 million a year). Ten years is the right window because it covers the pre-pandemic years, the 2021-2023 spirits boom and the 2024-2026 decline, and Brown-Forman has not been transformed by an acquisition in that time. The $267 million gain on the fiscal 2024 sale of Sonoma-Cutrer is a divestiture gain outside operating cash flow and does not enter these figures. Non-cash brand write-downs ($132 million in fiscal 2026, $87 million on Diplomatico and $45 million on Gin Mare, and $47 million on Gin Mare in fiscal 2025) are added back because the cash was spent when the brands were bought, but they are a warning that acquired brands have not earned what was paid, and we carry that in the bear case rather than in the earnings level. We did not move the starting level up to the fiscal 2026 result: that year included an $18 million benefit from collecting old duty-drawback claims, the filing says distributor stocking added to sales of el Jimador and Jack Daniel's Single Barrel, and capital spending ($107 million) was well below its ten-year average of about 3.7% of sales. The first quarter of fiscal 2027 (to July 31, 2026) was steady, with net income of $176 million versus $170 million and operating cash flow of $173 million versus $160 million a year earlier, but one quarter is not enough to change the level. Growth check. Owner earnings per share grew 20% in fiscal 2026 (from $1.39 to $1.67), a rebound from two weak years, while the base case assumes 0% growth in year one, below that rate. We give no credit for growth in the base case because nothing about future growth is secured: U.S. sales are shrinking, and emerging-market gains (for example the United Arab Emirates, Turkiye and New Mix in Mexico, up 41%) have not yet offset the declines. What we count as debt. At July 31, 2026 Brown-Forman owed $2,083 million of senior notes plus $358 million of short-term borrowings, and held $301 million of cash. The $351 million of notes due in fiscal 2027 were no longer outstanding by that date, while short-term borrowings had risen. The notes carry coupons of 2.60% ($405 million, due July 2028), 4.75% ($645 million, due April 2033), 4.00% ($296 million, due 2038), 3.75% ($248 million, due 2043) and 4.50% ($490 million, due 2045). Because these rates are below 6% for years, we reduce the debt figure by about $259 million, giving net debt of about $1,881 million, or $4.03 per share. Business cash flow is many times the roughly $101 million annual interest bill in every case below, and the notes contain only customary covenants, so we treat the debt as refinanceable in all three cases. Base case: $25.14 per share. Cash flow before interest stays at $1.75 per share, about $817 million, indefinitely. What keeps it going is the Jack Daniel's brand and its whiskey inventory, plus demonstrated pricing: net sales grew from $2,994 million in fiscal 2017 to $3,928 million in fiscal 2026 (about 3% a year) and cash flow per share never fell below $1.36 in that span. The business is worth about $29.17 per share (about $13.6 billion); it owes $4.03 per share, leaving $25.14. Bear case: $16.02 per share. Cash flow starts at $1.64 per share (the fiscal 2024 and 2025 low) and shrinks 4% a year for ten years, then holds at about $1.09 per share (roughly $509 million, five times the interest bill). The named drivers are the two straight years of roughly 7% declines in U.S. sales, the tariff and shelf-removal exposure in Canada, and the repeated write-downs of Gin Mare and Diplomatico. The business is worth about $20.05 per share (about $9.4 billion); it owes $4.03 per share, leaving $16.02. Bull case: $32.70 per share. Cash flow starts at the fiscal 2026 level of $1.89 per share and grows 2% a year for ten years, to about $2.30 per share (about $1.07 billion), then holds. Two percent is below the roughly 3% sales growth of the last nine years, which came through the pandemic and the current downturn; the cost reductions already under way (a 12% workforce reduction approved in fiscal 2025 and the closing and sale of the Louisville cooperage, completed in fiscal 2026) are the identified lever. The business is worth about $36.73 per share (about $17.1 billion); it owes $4.03 per share, leaving $32.70. We left out any market recovery, share gains and new-product growth because none can be pointed to as secured. Stress test. The main judgement is that we remove working-capital swings, which for a whiskey maker are mostly barrel inventory: about $1.5 billion of cash went into inventory over ten years, though the yearly build fell from $403 million in fiscal 2023 to $22 million in fiscal 2026 as production slowed. Because the base case credits no growth, it does not need new inventory. If Brown-Forman had to keep building inventory at its ten-year average of about $150 million a year just to hold sales flat, the base case would be roughly $5 per share lower. What changed since our last analysis. In August 2026 we showed $11.70, $22.60 and $36.30 per share for the bear, base and bull cases. The base case is now higher because we now discount at a uniform 6%, use fuller cash flow rather than net income plus depreciation less capital spending, and the fiscal 2026 result came in stronger than the level we assumed. The bull case is lower because we no longer assume a demand recovery, and the bear case is higher because the discount rate is lower even though we now model a ten-year decline. The shares would be worth less than we estimate if U.S. demand keeps falling faster than price increases can offset, if inventory must keep growing, or if further tariffs or retaliation close more markets.