This Oversold Stock Is 25% Undervalued. Is It Time to Buy?

Brown-Forman has had a rough few years. Demand weakness in the US and developed Europe and tariff concerns have taken a toll on results—and not surprisingly, the stock is well off its highs. But we think investors are underestimating the premium distiller’s long-term growth potential. Although the near-term demand outlook is weak, we expect brand strength, innovation, and emerging-market growth to return Brown-Forman’s annual sales to 3% expansion over the next decade. At today’s prices, we think the shares of this wide-moat company are a buy for patient, long-term investors. Brown-Forman was one of Morningstar Chief US Market Strategist Dave Sekera’s stock picks on The Morning Filter podcast this week, 5 Stocks to Buy to Upgrade Your Portfolio for 2026.

With over 150 years of distilling experience specializing in Tennessee whiskey and Kentucky bourbon, Brown-Forman has earned accolades and loyalty from drinkers for distinct flavors and consistent quality, building strong brand equity for its core Jack Daniel’s trademark in the US and globally. We like the growth prospects of this premium spirits maker, as its high-end positioning in the structurally attractive whiskey category—where a multiyear maturation process creates significant entry barriers—aligns well with the industry’s premiumization trend. Beyond this, we think the company is poised for volume expansion, thanks to a strong innovation pipeline promising new launches not only in whiskeys and tequilas, but also in the attractive and fast-growing ready-to-drink category.

Key Morningstar Metrics for Brown-Forman

• Fair Value Estimate: $40
• Star Rating: 4 Stars
• Economic Moat Rating: Wide
• Uncertainty Rating: High

Economic Moat Rating

We believe Brown-Forman has carved out a wide economic moat thanks to strong brand loyalty and the tight client relationships that it has cultivated for decades in its core whiskey business. The company also benefits from cost advantages by leveraging its scale in raw material procurement, advertising, and distribution. Considering its 150 years of experience managing through economic cycles, regulatory regimes, and shifting consumer trends, coupled with the long-term focus of its majority owner, the founding Brown family, we believe the company is well positioned to preserve its advantaged competitive standing. We expect the company to deliver returns on invested capital (with goodwill) above our estimated 7% weighted average cost of capital for more than 20 years.

Read more about Brown-Forman’s moat rating.

Fair Value Estimate for Brown-Forman Stock

Our $40 fair value estimate is 25 times estimated fiscal 2026 earnings per share and implies an enterprise value/adjusted EBITDA multiple of 18 times. For fiscal 2026, we forecast declines of 3% for sales and 14% for EPS. Over a 10-year horizon, we model 3.4% annual sales growth driven by our expectation for steady low-single-digit increases in spirits volume and pricing on an annual basis. We model adjusted operating margin to expand by 520 basis points relative to fiscal 2025 to 33.0% by the end of our 10-year forecast period, with gross margin expanding by 330 basis points to 62.0%. We expect a leaner workforce and productivity initiatives to drive down selling and labor expenses to 17.5% of sales by 2035, from 18.8% in 2025.

Read more about Brown-Forman’s fair value estimate.

Risk and Uncertainty

Brown-Forman faces regulatory and tax headwinds in the US and key international markets, including excise tax increases and health warning labels. Disputes between the US and its major trade partners could increase the likelihood of tariffs on US products, including whiskey. Brown-Forman also faces increasing competition from craft distillers that offer an alternative to established brands. Shortages or price fluctuations in key agricultural ingredients or packaging materials are another risk. While the probability is low, fire or natural disasters are a risk, given Brown-Forman’s concentrated production and warehousing in Tennessee and Kentucky.

Read more about Brown-Forman’s risk and uncertainty.

Brown-Forman Bulls Say

• Premiumization trends in spirits consumption, coupled with Brown-Forman’s strong innovation pipeline, bode well for mid- to high-single-digit top-line growth in the coming years.
• Acquisitions of superpremium gin and rum brands should diversify Brown-Forman’s portfolio and help open more doors with distributors and on-premises operators in Europe.
• The conversion to owned distribution in key international markets in Europe and Asia-Pacific should elevate brand positioning and foster closer ties with on-premises and retail clients.

Brown-Forman Bears Say

• Brown-Forman is less diversified than larger rivals Diageo and Pernod and could be more susceptible to volume swings, should demand soften for its core American whiskey products.
• Rising health concerns, especially among younger drinking-age consumers, about the impact of alcoholic beverages may threaten the distiller’s volume trajectory.
• Short supply and price inflation of key agricultural ingredients like agave and packaging materials like glass may disrupt Brown-Forman’s operations.

This article was compiled by Susan Dziubinski and Sylvia Hauser. Data as of Dec. 10, 2025, close unless otherwise noted.