Today's Strong And Under The Radar Stock: Brown-Forman (BF.A)

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer.

Trade-Ideas LLC identified Brown-Forman ( BF.A) as a strong and under the radar candidate. In addition to specific proprietary factors, Trade-Ideas identified Brown-Forman as such a stock due to the following factors:

  • BF.A has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $2.7 million.
  • BF.A is making at least a new 3-day high.
  • BF.A has a PE ratio of 33.
  • BF.A is mentioned 0.94 times per day on StockTwits.
  • BF.A has not yet been mentioned on StockTwits today.
  • BF.A is currently in the upper 20% of its 1-year range.
  • BF.A is in the upper 35% of its 20-day range.
  • BF.A is in the upper 45% of its 5-day range.
  • BF.A is currently trading above yesterday's high.

'Strong and Under the Radar' stocks tend to be worthwhile stocks to watch for a variety of factors including historical back testing and price action. Market technicians refer to such stocks as being in an accumulation phase before a mark-up and peak. Traders and hedge funds have frequently found that these types of stocks continue to build a solid price base and then ultimately spike higher and peak when others 'discover' how good the stock is performing. By leveraging the social discovery aspect of StockTwits we are highlighting stocks that don't currently receive much attention from retail investors, but we suspect may soon garner more attention.

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More details on BF.A:

Brown-Forman Corporation is engaged in the manufacture, bottling, import, export, marketing, and sale of alcoholic beverages. It provides whiskey, ready-to-drink cocktails, vodka, tequilas, champagnes, wines, liqueur, and other distilled spirits. The stock currently has a dividend yield of 1.2%. BF.A has a PE ratio of 33.

The average volume for Brown-Forman has been 15,500 shares per day over the past 30 days. Brown-Forman has a market cap of $8.8 billion and is part of the consumer goods sector and food & beverage industry. Shares are up 19.8% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Brown-Forman as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, increase in net income, notable return on equity and solid stock price performance. We feel its strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 5.1%. Since the same quarter one year prior, revenues slightly increased by 7.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • BROWN-FORMAN has improved earnings per share by 6.5% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, BROWN-FORMAN increased its bottom line by earning $3.20 versus $3.06 in the prior year. This year, the market expects an improvement in earnings ($3.50 versus $3.20).
  • The net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500, but is less than that of the Beverages industry average. The net income increased by 6.0% when compared to the same quarter one year prior, going from $133.00 million to $141.00 million.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Beverages industry and the overall market, BROWN-FORMAN's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • The debt-to-equity ratio is somewhat low, currently at 0.62, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.99 is somewhat weak and could be cause for future problems.

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