Investors are punishing a diversification offensive - towards rum, gin and tequila - that seems slow to bear fruit. Since March 2020, this strategy has enabled the world's leading bourbon producer to grow sales at an average rate of 8% a year.

This external growth strategy has nevertheless weighed on margins, due to integration costs and a slowdown in the US market. As a result, earnings per share stagnated - and even declined significantly - for the first time in twenty years.

This is an unpleasant development, all the more so because it is accompanied by a drop in return on equity from 50% to 25%. However, we can temper this criticism by pointing out that this is above all a return to the average after an exceptional episode, and that leverage has also fallen in comparable proportions.

In reality, the market had undoubtedly got carried away in the months following the outbreak of the pandemic. More optimistic than ever, it valued Brown-Forman at over forty times earnings between summer 2020 and summer 2023. The recent correction therefore looks more like a return to sanity than a sudden spike in pessimism.

Should it continue, the fall in share price could also prove excessive. At twenty-four times earnings, the stock has fallen back below the thirty times earnings floor that has bounded its valuation over the last decade, and below its twenty-year average of twenty-eight times earnings.

Brown-Forman, which has increased its dividend uninterruptedly over the last forty years, had carried out a massive share buyback at the last comparable valuation low in 2016-2017. It would not be surprising to see it buy back its shares again over the next few quarters if the downturn continues.