Beer maker Anheuser-Busch InBev (NYSE:BUD) finished last week at a price of just $45.16.
The stock recently hit a 52-week low. Although it dipped lower during the 2020 market crash, the
stock is effectively trading at levels it was at more than a decade ago.
Based on analyst estimates, Anheuser-Busch is trading at a forward price-to-earnings multiple
of less than 14. That's slightly cheaper than the average stock on the S&P 500 , which trades at
about 16 times future profits. It's not a dirt-cheap buy, but there's some good value here for
investors.
Anheuser-Busch has the potential to be an underrated buy given that its business should be
fairly stable in the long run. It has some popular brands in its portfolio, including Budweiser, Bud
Light, Stella Artois, and other names that beer drinkers are familiar with. The economy is
returning to normal and there's normally good demand for beer regardless of what state the
country is in. The company's recent results do suggest that it may be one of the more resilient
businesses to invest in today. Last quarter, in Q2, the company's revenue rose by 11.3% year
over year.
The biggest risk surrounding the company relate to its debt levels, which total more than $83
billion. During the first half of the year, its net interest expense was $1.7 billion, about one-
quarter of the $7.1 billion in EBIT that it reported over that same period. As interest rates rise,
that could put more of a strain on the company's bottom line, which at $2.5 billion through the
first two quarters, is down 20% year over year.
Overall, Anheuser-Busch remains a top beer company to invest in and could be a good
contrarian bet to make right now. It's working on bringing down its debt levels and there's still
plenty of buffer for the company to turn a solid profit even if interest rates continue rising.
