The series on most undervalued stocks will look at company’s cash flow, price to sales rations, balance sheet, earnings portential and future P/E forecasts to find shares that trade at a discount to their potentail value.
Anheuser-Busch (BUD) traded at $46 in mid-December 2002. It currently changes hands at about $48. During that period operating income has been fairly flat at in the $3.3 to $2.7 billion range.
Recently, BUD did a deal with InBev to import certain popular brands like Becks, which should add to it revenue. Deals like this may grow because BUD has by far the largest share of the US market and a huge distribution network that would allow other company’s to piggy back off of its infrastructure. BUD is also diversifying overseas to ramp up its revenue. Recently it has purchased assets in Mexico and China.
While Diageo, a European competitor with revenue of just over $12 billion has a market cap of $59 billion, BUD has a cap of $36 billion on revenue of over $15 billion.
UBS recently upped its rating on BUD due to the InBev deal and the company says it will raise prices next year. The company has reiterated its long-term growth goals which means that 2007 could be a strong year for the brewer.
Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.
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