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Anheuser-Busch Inbev Case Summary

606 Words3 Pages

Anheuser-Busch InBev (BUD) is an internationally recognized brewing company that produces beers and soft drinks. It is a public company located in Belgium. BUD was created when Interbrew, AmBev, and Anheuser-Busch had merged in 2008. It is the largest brewing company in the world with almost a quarter of the global brewing industry share. The closing price of BUD was 128.27 on April 24, 2016. However, I believe it is undervalued, and I value the stock price to be $162.49. My recommendation is that BUD stocks should be bought by investors because the company`s dividend has a high average growth rate, the company has a higher cash flow per share than the market average and experiences high earnings per share (EPS) growth with a strong return …show more content…

According to the BARRA risk analysis model, BUD`s value at risk (VaR) number is 1% for a monthly and 5% for a daily analysis. This number explains how risky a stock is comparing to the market index. Since both numbers are relatively small on a scale of 100, investing in BUD has a pretty low risk; however, it is riskier than investing in the market itself. As it was discussed before, the company`s beta of 1.14 is also a sign that it is more volatile than the market; yet, it is a pretty small difference. Moreover, Anheuser-Busch InBev is a large cap company with a 206 billion market cap. The French and Fama model argues that there are higher risks and rewards associated with small cap companies, so investing in BUD will be less risky than investing in a small cap. Being a large cap offers more stability in the company and continuous dividend payouts. Furthermore, since Anheuser-Busch InBev is an international company located in Belgium, there are more factors that affect them, such as currency risk. Also, an increase in interest rates may reduce company`s revenues because of lower consumption levels, and it may translate into lower stock prices. However, this risk eventually will affect all the stocks in the market, so one should consider BUD to be a low-risk

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