Latest news with #TreasuryWine
Bloomberg
8 hours ago
- Business
- Bloomberg
Penfolds Maker Treasury Says Asia Leads Wine Consumption Growth
Treasury Wine Estates Ltd. said it's seeing strong sales in Asia thanks to the reestablishment of its China market, and announced an imminent share buyback. The Australian vintner reaffirmed its earnings forecast for the 2025 financial year at about A$770 million ($499 million), according to an investor update released on Tuesday, in line with previous estimates. The company also flagged a share buyback of up to 5% of issued capital in August.
AU Financial Review
10 hours ago
- Business
- AU Financial Review
Penfolds owner won't compromise on price as earnings wobble
Treasury Wine Estates has no plans to cut prices for its flagship Penfolds range, saying demand for premium wines remains solid, while blaming a weaker profit outlook on the cost of additional staff hires to boost sales. Departing chief executive Tim Ford said the company would spend an extra $10 million to expand its sales force in China – the biggest market for Penfolds, which generates almost 60 per cent of Treasury Wine's profits.
Yahoo
11-06-2025
- Business
- Yahoo
Are Investors Undervaluing Treasury Wine Estates Limited (ASX:TWE) By 47%?
Using the 2 Stage Free Cash Flow to Equity, Treasury Wine Estates fair value estimate is AU$15.36 Treasury Wine Estates' AU$8.17 share price signals that it might be 47% undervalued Our fair value estimate is 38% higher than Treasury Wine Estates' analyst price target of AU$11.16 Does the June share price for Treasury Wine Estates Limited (ASX:TWE) reflect what it's really worth? Today, we will estimate the stock's intrinsic value by taking the expected future cash flows and discounting them to today's value. We will take advantage of the Discounted Cash Flow (DCF) model for this purpose. Don't get put off by the jargon, the math behind it is actually quite straightforward. Companies can be valued in a lot of ways, so we would point out that a DCF is not perfect for every situation. For those who are keen learners of equity analysis, the Simply Wall St analysis model here may be something of interest to you. AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early. We are going to use a two-stage DCF model, which, as the name states, takes into account two stages of growth. The first stage is generally a higher growth period which levels off heading towards the terminal value, captured in the second 'steady growth' period. To begin with, we have to get estimates of the next ten years of cash flows. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years. Generally we assume that a dollar today is more valuable than a dollar in the future, and so the sum of these future cash flows is then discounted to today's value: 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 Levered FCF (A$, Millions) AU$472.8m AU$434.4m AU$498.0m AU$496.8m AU$500.5m AU$507.5m AU$517.0m AU$528.3m AU$541.1m AU$555.1m Growth Rate Estimate Source Analyst x4 Analyst x4 Analyst x3 Analyst x1 Est @ 0.74% Est @ 1.40% Est @ 1.87% Est @ 2.19% Est @ 2.42% Est @ 2.58% Present Value (A$, Millions) Discounted @ 6.4% AU$444 AU$384 AU$413 AU$387 AU$367 AU$350 AU$335 AU$321 AU$309 AU$298 ("Est" = FCF growth rate estimated by Simply Wall St)Present Value of 10-year Cash Flow (PVCF) = AU$3.6b We now need to calculate the Terminal Value, which accounts for all the future cash flows after this ten year period. The Gordon Growth formula is used to calculate Terminal Value at a future annual growth rate equal to the 5-year average of the 10-year government bond yield of 2.9%. We discount the terminal cash flows to today's value at a cost of equity of 6.4%. Terminal Value (TV)= FCF2034 × (1 + g) ÷ (r – g) = AU$555m× (1 + 2.9%) ÷ (6.4%– 2.9%) = AU$16b Present Value of Terminal Value (PVTV)= TV / (1 + r)10= AU$16b÷ ( 1 + 6.4%)10= AU$8.9b The total value is the sum of cash flows for the next ten years plus the discounted terminal value, which results in the Total Equity Value, which in this case is AU$12b. To get the intrinsic value per share, we divide this by the total number of shares outstanding. Relative to the current share price of AU$8.2, the company appears quite good value at a 47% discount to where the stock price trades currently. Remember though, that this is just an approximate valuation, and like any complex formula - garbage in, garbage out. We would point out that the most important inputs to a discounted cash flow are the discount rate and of course the actual cash flows. Part of investing is coming up with your own evaluation of a company's future performance, so try the calculation yourself and check your own assumptions. The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance. Given that we are looking at Treasury Wine Estates as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. In this calculation we've used 6.4%, which is based on a levered beta of 0.800. Beta is a measure of a stock's volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business. View our latest analysis for Treasury Wine Estates Strength Debt is not viewed as a risk. Weakness Earnings declined over the past year. Dividend is low compared to the top 25% of dividend payers in the Beverage market. Opportunity Annual earnings are forecast to grow faster than the Australian market. Trading below our estimate of fair value by more than 20%. Threat Dividends are not covered by earnings and cashflows. Annual revenue is forecast to grow slower than the Australian market. Valuation is only one side of the coin in terms of building your investment thesis, and it shouldn't be the only metric you look at when researching a company. It's not possible to obtain a foolproof valuation with a DCF model. Instead the best use for a DCF model is to test certain assumptions and theories to see if they would lead to the company being undervalued or overvalued. If a company grows at a different rate, or if its cost of equity or risk free rate changes sharply, the output can look very different. Can we work out why the company is trading at a discount to intrinsic value? For Treasury Wine Estates, there are three additional factors you should look at: Risks: Be aware that Treasury Wine Estates is showing 2 warning signs in our investment analysis , and 1 of those is a bit concerning... Future Earnings: How does TWE's growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart. Other High Quality Alternatives: Do you like a good all-rounder? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing! PS. Simply Wall St updates its DCF calculation for every Australian stock every day, so if you want to find the intrinsic value of any other stock just search here. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
