Tuesday, 17 September 2024

BRG - Breville

 BRG - Breville
22/10/26
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Over the last 5 years, Breville Group (ASX:BRG) has demonstrated strong, steady growth. Revenue nearly doubled from $0.98B in FY21 to $1.70B in FY25, pushing net profit up to $135.9M. The balance sheet has remained exceptionally healthy, with the Debt-to-Equity ratio shrinking to (0.12) in FY25 and hovering around (0.28) as of early 2026. Return on Equity (ROE) has stayed consistently robust, averaging 16.8% between 2021 and 2025. [1, 2, 3, 4, 5]
Financial Snapshot
  • Profit (NPAT): Grew reliably over the last five years, climbing from $91M in FY21 to $135.9M in FY25. This upward trend continued into the first half of FY26, where revenue hit a record $1.10B with a net income of $98.2M. [1, 2, 3, 4, 5]

  • Debt: The company maintains a very safe and conservative balance sheet. While long-term debt was around $257.5M in 2023, the company successfully paid it down, recording a net cash position of $48.5M at the end of FY25. By 1H26, net debt sat at a comfortable $43.6M. [1, 2, 3, 4, 5]
These are the D/E ratios for the last 5 years:
2026 - 0.28
2025 - 0.12
2024 - 0.18
2023 - 0.36
2022 - 0.36
  • ROE (Return on Equity): Peaked at 19.7% in 2021 and stabilized between 13.5% and 15.9% from 2022 to 2026. This continues to track well above the global industry average. [1, 2, 3]


  • Dividends: Supported by reliable free cash flow, the board maintained a targeted ~40% payout ratio, offering fully franked dividends that grew to 37.0 cents per share in FY25. [1, 2, 3]
It's a steady dividend payer. Though the dividends haven't quite recovered to the levels of 2020 when the craze for making coffee at home during COVID was at it's height.


Current Valuation & Forecast
Recently, BRG has been trading at a Price-to-Earnings (P/E) ratio near 33.8. While the stock price has seen some volatility—falling roughly 14% over a 90-day period in early 2026—analysts forecast continued revenue growth of 7.5% annually over the coming years, outpacing the broader global consumer durables sector
PE Ratios
The mean historical Price-to-Earnings (P/E) ratio for Breville Group Limited (ASX: BRG) over the last 10 years is 30.54, with a historical range swinging between a minimum of 19.21 and a maximum of 49.70. [1, 2, 3]
Historical P/E Ratio Data (10-Year Breakdown)
The table below tracks Breville's annual fiscal P/E ratios over the last decade, showing a clear contraction during 2022 followed by an upward re-rating through 2025 and 2026: [1, 2, 3]
Year / Period [1, 2, 3, 4, 5, 6]P/E RatioKey Market Drivers
Current (Mid-2026)34.24Valuation premium sustained by steady international sales.
202531.71Normalizing premium over peer averages.
202433.18Upward valuation correction as margins steadied.
202326.20Partial recovery post-rate hike shocks.
202223.6010-year low due to global supply chain pressures.
202149.70Historical peak driven by the work-from-home appliance boom.
202045.68Initial pandemic-induced demand spike for kitchen premium goods.
201928.63Solid trading history aligned with long-term median.
201824.50Baseline valuation reflecting steady global expansion.
201721.80Moderate growth multiple prior to aggressive scaling.
201619.21Period low reflecting more localized APAC operations.
Core Valuation Insights
  • Premium Over Peers: Breville traditionally commands a higher trading multiple compared to the broader ASX Consumer Durables industry average, which historically hovers around 13.8x. [1]
  • Growth Expectations: Investors pay a higher multiple due to the company's strong brand equity and its track record of expanding premium product lines into global regions like Europe and the Americas. [1, 2, 3]

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share price
I think its a bit expensive at the moment July 2026.
Buy below $26.50

At its current earnings (oct 2026), the share price for Breville Group Limited (ASX:BRG) would need to be A$17.86 to have a P/E ratio of 19.
This is calculated based on Breville's trailing twelve months (TTM) earnings per share (EPS) of A$0.94. [1]
Target Price=Current EPS x Target P/E Ratio
$17.86=$0.94 x 19
For comparison, Breville's stock historically trades at a premium; its current market price sits around A$30.04, representing a significantly higher trailing P/E ratio of 31.96



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ROIC Vs WACC

Over the last 10 years, Breville Group (ASX:BRG) has generally maintained a Return on Invested Capital (ROIC) that stays near or above its Weighted Average Cost of Capital (WACC), reflecting steady economic value creation. Current metrics indicate an ROIC of roughly 12.8% against a WACC spanning between 7.9% and 14.3% depending on short-term market fluctuations and calculation models. [1, 2, 3, 4, 5]
Capital Efficiency and Returns
  • ROIC (Return on Invested Capital): Hovering around 12.8% (trailing twelve months), demonstrating efficient conversion of capital into operating profits. Over the multi-year stretch, it has consistently tracked in the double digits. [1, 2, 3]
  • WACC (Cost of Capital): Historically averaging near a 9% to 10% baseline over prior cycles, though recent shifts put the cost of capital dynamically between 7.9% (AlphaSpread estimate) and spikes up to 14.3% under shifting equity risk premiums (GuruFocus metric). [1, 2, 3]
Value Creation Spread
  • Positive Spread: For most of the past decade, BRG's stable ROIC safely exceeded its standard WACC hurdle rate, meaning the business has effectively grown while creating net economic value for shareholders. [1, 2]
  • Recent Balance: In periods where WACC edges higher due to broader macroeconomic discount rate expansions, the spread narrows or compresses closer to parity, signalling tighter marginal value creation on new capital deployment. [1]
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Buffett valuations

Breville Group Limited (ASX: BRG) represents a premium brand compounder that strongly aligns with Warren Buffett’s quantitative investment principles. [1, 2]
The company maintains high single-digit net margins, consistent profitability, and an exceptionally conservative capital structure. [1, 2]
A detailed structural analysis of Breville’s Return on Equity (ROE) trends and its capital allocation framework evaluated against standard Buffett benchmarks reveals the following insights:
Historical Return on Equity (ROE) Trends
Breville has historically generated premium returns on its capital relative to broad consumer discretionary peers. However, its Trailing Twelve Month (TTM) ROE sat at 13.59% as of late 2026, down from its five-year peak of 18.86% in 2021. [1, 2]
The visual layout below plots Breville's distinct five-year ROE down-trend

DuPont Breakdown of the Trend:
  • Operating Margins: Net profit margins have held relatively stable near 7.6% – 8.0%. This indicates that structural pricing power (the economic moat) remains intact despite macro pressures. [1, 2]
  • Asset Efficiencies: The ROE compression is primarily driven by an increasing asset base. Breville intentionally accumulated inventory globally post-pandemic to safeguard its supply chain, lowering its asset turnover ratio. [1]
  • Deleveraging: Over the multi-year cycle, the firm has cleared debt aggressively, moving into a net cash position. Less financial leverage mathematically lowers the top-line ROE calculation, lowering risk without reflecting a loss in operational competitive advantage. [1, 2]
Capital Allocation vs. Buffett Benchmarks
Warren Buffett evaluates management through a strict lens of capital deployment. Below is a direct comparison of Breville’s structural performance metrics against standard Berkshire Hathaway investment benchmarks: [1, 2, 3]
Buffett Benchmark CriteriaBenchmark RequirementBreville Group (ASX:BRG) PerformanceVerdict
Consistent High ROE> 15% consistently5-Year Average: 15.6% (Current: 13.6%)Pass
Conservative Debt LevelsDebt/Equity < 0.50Current Debt/Equity: 8.4% ($153.4M Debt vs. $1.06B Equity)Strong Pass
Liquidity & SafetyNet Cash or Minimal DebtNet Cash Position: +$39.94M AUD ($193.4M Cash)Strong Pass
Interest Coverage> 5.0x EBIT / InterestCurrent Net Interest Cover: 14.96xStrong Pass
Capital Intensity (CapEx)Low asset-heavy reinvestmentCapEx completely covered by organic operating cash flowsPass
1. The Retained Earnings Test
Buffett’s golden rule states that a company must create at least $1 of market value for every $1 of earnings retained. [1]
  • Breville satisfies this via high Return on Invested Capital (ROIC) of 14.6% and Return on Capital Employed (ROCE) of 17.1%. [1]
  • Management reinvests cash back into internal product R&D and global market expansions at returns that comfortably exceed its estimated Weighted Average Cost of Capital (WACC). [1]
2. Debt & Financial Safety
Buffett detests companies that generate high ROE by piling on debt leverage. Breville is exemplary here. Its balance sheet is fortress-like, showcasing a debt-to-equity ratio of only 8.4% (even cleaner than Berkshire's typical ~17% benchmark). It maintains $193.36M in cash equivalents, entirely neutralizing its gross debt footprint. [1, 2, 3, 4, 5]
3. Dividend Discipline
When a company cannot deploy cash internally at premium rates, Buffett expects it to be returned to owners. Breville matches this by paying out a steady, fully franked 1.26% dividend yield, returning $50.38M to shareholders annually while retaining enough balance sheet capacity to fund its organic product pipelines. [1, 2]
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