Treasury wines are acquiring the Frank family vineyards. We take a closer look at some of the financials.

Revenues have been flat for some time. Wine is a tough business. Add to that China’s imposition of exorbitant tariffs, rendering Australian wine effectively uneconomic (priced out of the market) and you’ve had a problem.

Equally, they’ve done a good job shifting volumes to other regions, which you can see in the graph above.

COVID also wrought havoc with revenues and margins, as restaurants closed, and people couldn’t have friends over (and hence less need for the fancy bottle when there’s no-one to impress).

Still, TWE didn’t get stuck with enormous amounts of inventory that they couldn’t move…

…and margins appear to have been maintained, on an adjusted basis.

On a reported basis, they still appear decent, at plausible “mid cycle” levels, post COVID and tariff impacts, which one can (somewhat) assume to be non-permanent.

Cashflows are strong, with good earnings quality.

The deterioration in quality back in 2017-2018 (amidst allegations of “channel stuffing”) saw the share price fall from $20 to $14.

Those issues appear to be behind them now.

It doesn’t stand out as raging value, indeed simply reasonably priced.

…but the expectations are not unduly high.

It does screen as a QGARP stock, which are thin on the ground, at present.

24x forward earnings is stretching the “reasonable price” part, but not break-ably so, particularly if funded from other high PE stocks (like CSL, within the sector, or other defensives, like COL, which now trades at a similar multiple).

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