Essay Wine Industry Financial Analysis

1000 Words 4 Pages
Wine Industry Financial Analysis

DESCRIPTION OF BUSINESS

Canandaigua Brands, Inc. (formerly Canandaigua Wine Company, Inc.) is a producer and supplier of wine and an importer and producer of beer and distilled spirits in the United States. It maintains a portfolio of over 130 national and regional brands of beverage alcohol which are distributed by over 850 wholesalers throughout the United States and selected international markets. Its beverage alcohol brands are marketed in three general categories: wine, beer and distilled spirits. Brands include: Paul Masson, Manischewitz, Monte Alban, Almaden, Barton’s Gin and Corona Beer.

MANAGEMENT PERFORMANCE

Management performance is good.

Canandaigua’s return on assets is better than the
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The company exceeds the industry’s quick ratio as well. Canandaigua’s accounts receivable turnover is getting better, but is still higher by 6.42 days. The company’s days inventory is less than half of the industry standard, and almost three times less than the other two companies analyzed. Canandaigua could do a better job utilizing interest free financing. Its accounts days payable is much less than the industry standard. Cash conversion is much lower than others in the industry as well as the industry standard. This is probably due to the amount of beer that is sold, as opposed to wine which requires longer aging time.

LONG-TERM LENDORS

Long-term liquidity is good.

Very few assets are required to service debt. Canandaigua’s debt to asset ratio is much lower(.33) than the industry standard(.63). This seems to be the case with the other two companies within this analysis. The company needs to continue to increase net income and reduce debt to improve its interest coverage ratio. Altman’s Z shows that there is a low probability of bankruptcy for Canandaigua.

INVESTORS

This stock is a buy.

Canandaigua’s earnings per share is good in comparison to the other two companies in this analysis. EPS has improved from last year. The company has an adequate price to earnings ratio, but it is not as good as Beringer’s.

BERINGER WINE ESTATES HOLDINGS, INC.

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