BUD vs. DEO: Which Stock Has More Spirit?

Core Viewpoint - Anheuser-Busch InBev (BUD) is considered a better investment option compared to Diageo (DEO) due to its lower valuation and potential for growth in the coming years [1][12]. Group 1: Stock Performance Comparison - Both DEO and BUD have underperformed the broader markets, with DEO declining 15% from $145 to$120 and BUD declining 25% from $65 to$50 since early January 2021, while the S&P 500 has increased by 60% during the same period [3]. - The returns for DEO and BUD have fluctuated inconsistently, with DEO showing returns of 42% in 2021, -17% in 2022, -16% in 2023, and -10% in 2024, while BUD had returns of -13%, 0%, 9%, and -21% respectively [4]. Group 2: Revenue Growth Analysis - Anheuser-Busch InBev has experienced an average annual revenue growth rate of 8.3%, increasing from $46.9 billion in 2020 to$59.4 billion in 2023, while Diageo's growth rate is 6.1%, rising from $17.6 billion in fiscal 2021 to$20.3 billion in fiscal 2024 [6]. - BUD's revenue growth is attributed to a rebound in consumer demand post-pandemic, although it faced a 12% year-over-year decline in North America revenue in 2023 due to lower Bud Light sales [7]. - Diageo's revenue growth has been impacted by high inflation and weakening consumer spending, leading to a decline in volumes, particularly in North America [8]. Group 3: Profitability and Financial Risk - Diageo is more profitable, with an operating margin of around 30% compared to BUD's 25%, which has decreased from 26.9% in 2020 to 24.0% in 2023 [10]. - Diageo has a lower financial risk profile, with 32% debt as a percentage of equity compared to BUD's 82% [11]. Group 4: Valuation and Future Prospects - BUD is currently trading at 1.6x trailing revenues, lower than its average P/S ratio of 2.2x, suggesting a potential growth of over 35% if it returns to historical valuation multiples, while DEO is trading at 3.3x trailing revenues with a potential growth of around 25% [12].