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Remy Cointreau

RCO: XPAR (FRA)
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Morningstar Rating for Stocks Fair Value Economic Moat Capital Allocation
€113.00CbxjhLqwjgfgn

Fundamentals Solid as Remy Exits Fiscal 2021; Strategic Investments to Ramp in ‘22; Shares Expensive

With narrow-moat Remy Cointreau having already reported full-year sales, we believe profits, the horizon to full recovery, and strategy were the main items on investors’ minds heading into its fiscal 2021 earnings print. With the stock riding a seemingly unbridled wave of momentum over the past few months, near- and long-term expectations were undoubtedly high. This was apparent from the mid-single-digit post-print decline in shares despite what we deemed to be solid results (ahead of our expectations on margins). Still, investor expectations will need a lot more tempering to knock the stock’s valuation multiples off the still-grandiose perch on which they rest. Ultimately, we plan to raise our fair value estimate to EUR 136 from EUR 118. This reflects time value (particularly as our model roll brings forward future cash flows), and modestly higher medium-term margins as the distiller is on a better-than-expected trajectory relative to its 2030 financial targets (calling for 72% gross margin and 33% adjusted operating margin). Nevertheless, with Remy and its distillation peers trading in the valuation stratosphere, we suggest investors look to brewers (like no-moat Molson Coors or wide-moat A-B InBev) for alcohol exposure.

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