A Financial Analysis of Quilmes Industrial SA
The brewery industry encompasses many companies you have heard about, but other companies you have never had a chance to investigate.
With market cap leaders such as Anheuser-Busch Companies or Molson Coors Brewing Company being the recognizable corporations in the United States, little attention is paid to other companies such as Quilmes Industrial SA (LQU).
This mid-cap 4.
4 billion dollar company has had a terrific share price rally over the past few years and has the capabilities to compete with the larger cap leaders of this industry.
Quilmes takes a different spin with its brewery plan, however.
Instead of focusing in the North American market, Reuters claims that this company, "a multinational brewer and marketer of beer and other beverages," has "operations in the combined Southern Cone markets of Argentina, Bolivia, Chile, Paraguay and Uruguay.
" These South American countries have performed quite well over the past year.
Argentina's Merval Index has improved 16% during this time, and Chile's Stock Market Select has also improved over 37%.
It's true that Quilmes has profited from this growth with a share price improvement of 72% this past year, but with continuing growth in these emerging markets, there is no reason to believe that these growth rates will slowdown in the foreseeable future.
Even if growth will stabilize over the course of the next year, it is important to remember that beer is an inelastic good.
What that means is that even when times are not economically favorable, consumers will still purchase beer in similar quantities compared to times of economic growth.
Quilmes focuses on soft drink and water operations as well, both of which are also inelastic goods.
These extra substitutes will only contribute to the growing revenue and profit Quilmes has seen over the past few years.
Speaking of revenue growth, Quilmes has seen 22.
3% quarter over quarter yearly growth, according to Capital IQ.
Its market capitalization competitors such as Molson Coors has only seen 10.
6% growth, and its geographical competitors such as SouthCompanhia de Bebidas Das Americas has only seen a respective 13.
6% revenue growth rate.
Quilmes revenue per share over the past twelve months of 21.
5 is also above SouthCompanhia's 13.
6 and Anheuser-Busch's 20.
4.
This high sales growth has also transcended into profitability.
Quilmes has seen 21% net income growth over the past year which is a strong number for a mid-size company.
This number is also quite strong when utilized with Quilmes' current share price.
Its forward P/E ratio of 16.
61 beats the industry's respective multiple of 25 and is reasonably consistent with the multiples of its competitors.
Some may argue that this mediocre multiple illustrates that Quilmes is not undervalued.
While this is true to an extent, some other useful multiples differ from this assertion.
Quilmes' enterprise value to revenue multiple of 3.
55 is lower than SouthCompanhia's 4.
65, and its price to sales ratio of 3.
52 is also quite lower than SouthCompanhia's number of 4.
21.
Quilmes' enterprise value to EBITDA of 8.
66 is also performing quite well, beating out SouthCompanhia's 10.
80, Molson Coors' 9.
23 and Anheuser-Busch's 10.
99.
With much of this cash going into capital expenditure (15.
63 compared to the industry's 0.
86), this company has a strong future.
Much of this capital will evolve into technological or development improvements, adding some competitive advantage against its competitors.
This growth is also seen through its relatively low PEG ratio of 1.
18 over the next five years, beating out all three of the aforementioned rivals.
While it may be true that this company is not undervalued compared to its high share price, there is still a lot of optimism going into this company, and you, as an investor, should follow the momentum.
Much of this momentum can also be attributed to the management.
Agustin Garcia Mansilla and his 6,600 employees have done a phenomenal job with this company, especially over the past couple of years.
Return on equity of 30% beats the industry's 15% and every other company in the brewery industry, excluding Anheuser-Busch.
Return on Assets of 14% is also above the industry's 7% average, and Return on Investment of 24% beats out the industry average's 9% as well.
Much of this success on the balance sheet has extended to Quilmes' solvency.
Its most recent quarter current ratio of 3.
6 is handily above Molson, Anheuser-Busch, and SouthCompanhia.
It does have a bit of total debt compared to cash, but total debt to equity, 0.
54, does offer some reassurance.
These numbers will continue to grow, given the strong optimism this company presents itself with, and should be enough to continue Quilmes to reach more historical highs.
Therefore, Quilmes is a strong buy, because of the amazing potential, given its location and fundamental background.
This company has improved in terms of share price over the past 52 weeks nearly 77%, regardless of its low beta, but if South America continues to improve this company, this high rate should not concern investors.
Dividend payout out at 0.
9% is not as strong as some of its competitors, but with a short ratio of 2, higher than both Molson and Anheuser-Busch, a technician will remain quite optimistic on where this stock is heading.
Once again, as South America continues to expand, Quilmes will too--also expanding quite nicely in your portfolio.
With market cap leaders such as Anheuser-Busch Companies or Molson Coors Brewing Company being the recognizable corporations in the United States, little attention is paid to other companies such as Quilmes Industrial SA (LQU).
This mid-cap 4.
4 billion dollar company has had a terrific share price rally over the past few years and has the capabilities to compete with the larger cap leaders of this industry.
Quilmes takes a different spin with its brewery plan, however.
Instead of focusing in the North American market, Reuters claims that this company, "a multinational brewer and marketer of beer and other beverages," has "operations in the combined Southern Cone markets of Argentina, Bolivia, Chile, Paraguay and Uruguay.
" These South American countries have performed quite well over the past year.
Argentina's Merval Index has improved 16% during this time, and Chile's Stock Market Select has also improved over 37%.
It's true that Quilmes has profited from this growth with a share price improvement of 72% this past year, but with continuing growth in these emerging markets, there is no reason to believe that these growth rates will slowdown in the foreseeable future.
Even if growth will stabilize over the course of the next year, it is important to remember that beer is an inelastic good.
What that means is that even when times are not economically favorable, consumers will still purchase beer in similar quantities compared to times of economic growth.
Quilmes focuses on soft drink and water operations as well, both of which are also inelastic goods.
These extra substitutes will only contribute to the growing revenue and profit Quilmes has seen over the past few years.
Speaking of revenue growth, Quilmes has seen 22.
3% quarter over quarter yearly growth, according to Capital IQ.
Its market capitalization competitors such as Molson Coors has only seen 10.
6% growth, and its geographical competitors such as SouthCompanhia de Bebidas Das Americas has only seen a respective 13.
6% revenue growth rate.
Quilmes revenue per share over the past twelve months of 21.
5 is also above SouthCompanhia's 13.
6 and Anheuser-Busch's 20.
4.
This high sales growth has also transcended into profitability.
Quilmes has seen 21% net income growth over the past year which is a strong number for a mid-size company.
This number is also quite strong when utilized with Quilmes' current share price.
Its forward P/E ratio of 16.
61 beats the industry's respective multiple of 25 and is reasonably consistent with the multiples of its competitors.
Some may argue that this mediocre multiple illustrates that Quilmes is not undervalued.
While this is true to an extent, some other useful multiples differ from this assertion.
Quilmes' enterprise value to revenue multiple of 3.
55 is lower than SouthCompanhia's 4.
65, and its price to sales ratio of 3.
52 is also quite lower than SouthCompanhia's number of 4.
21.
Quilmes' enterprise value to EBITDA of 8.
66 is also performing quite well, beating out SouthCompanhia's 10.
80, Molson Coors' 9.
23 and Anheuser-Busch's 10.
99.
With much of this cash going into capital expenditure (15.
63 compared to the industry's 0.
86), this company has a strong future.
Much of this capital will evolve into technological or development improvements, adding some competitive advantage against its competitors.
This growth is also seen through its relatively low PEG ratio of 1.
18 over the next five years, beating out all three of the aforementioned rivals.
While it may be true that this company is not undervalued compared to its high share price, there is still a lot of optimism going into this company, and you, as an investor, should follow the momentum.
Much of this momentum can also be attributed to the management.
Agustin Garcia Mansilla and his 6,600 employees have done a phenomenal job with this company, especially over the past couple of years.
Return on equity of 30% beats the industry's 15% and every other company in the brewery industry, excluding Anheuser-Busch.
Return on Assets of 14% is also above the industry's 7% average, and Return on Investment of 24% beats out the industry average's 9% as well.
Much of this success on the balance sheet has extended to Quilmes' solvency.
Its most recent quarter current ratio of 3.
6 is handily above Molson, Anheuser-Busch, and SouthCompanhia.
It does have a bit of total debt compared to cash, but total debt to equity, 0.
54, does offer some reassurance.
These numbers will continue to grow, given the strong optimism this company presents itself with, and should be enough to continue Quilmes to reach more historical highs.
Therefore, Quilmes is a strong buy, because of the amazing potential, given its location and fundamental background.
This company has improved in terms of share price over the past 52 weeks nearly 77%, regardless of its low beta, but if South America continues to improve this company, this high rate should not concern investors.
Dividend payout out at 0.
9% is not as strong as some of its competitors, but with a short ratio of 2, higher than both Molson and Anheuser-Busch, a technician will remain quite optimistic on where this stock is heading.
Once again, as South America continues to expand, Quilmes will too--also expanding quite nicely in your portfolio.