On October 27, 2023, Boston Beer Co Inc (SAM, Financial) experienced a daily loss of 7.35%, contrasting with a 3-month gain of 7.62%. With an Earnings Per Share (EPS) of 5.27, the question arises: Is the stock modestly undervalued? This article provides a comprehensive analysis of Boston Beer Co's valuation, inviting readers to explore its financial health, profitability, and growth potential.
Company Introduction
Boston Beer Co Inc (SAM, Financial) is a top player in high-end malt beverages and adjacent categories in the U.S., boasting strong positions in craft beer, flavored malt beverage, hard cider, and hard seltzer. The majority of its volume and revenue are concentrated in four brands: Samuel Adams, Angry Orchard, Twisted Tea, and Truly Hard Seltzer. The firm produces beverages using a hybrid model, leveraging both in-house capacities and third-party breweries through contract arrangements. With 96% of its sales generated in the U.S., Boston Beer Co Inc (SAM) presents an intriguing case for valuation analysis.
Understanding GF Value
The GF Value is a proprietary measure of a stock's intrinsic value, computed considering historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line represents the fair trading value of the stock. If the stock price is significantly above the GF Value Line, it is overvalued, and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
As of October 27, 2023, Boston Beer Co's stock appears to be modestly undervalued at a price of $338.05 per share, with a market cap of $4.10 billion. This suggests that the long-term return of its stock is likely to be higher than its business growth.
Link: These companies may deliver higher future returns at reduced risk.
Financial Strength
Investing in companies with strong financial strength reduces the risk of permanent loss. Boston Beer Co's cash-to-debt ratio of 4.18 is better than 71.86% of the 199 companies in the Beverages - Alcoholic industry, indicating strong financial health.
Profitability and Growth
Profitable companies, especially those with consistent profitability over the long term, are generally safer investments. Boston Beer Co's profitability is strong, having been profitable 10 times over the past 10 years. However, its operating margin of 5.73% ranks worse than 59.05% of 210 companies in the Beverages - Alcoholic industry.
Growth is a crucial factor in a company's valuation. Boston Beer Co's 3-year average annual revenue growth of 17.3% ranks better than 81.22% of 197 companies in the Beverages - Alcoholic industry. However, its 3-year average EBITDA growth rate of -0.3% ranks worse than 67.6% of 179 companies in the same industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to the weighted average cost of capital (WACC) can provide insights into its profitability. When the ROIC is higher than the WACC, it implies the company is creating value for shareholders. For the past 12 months, Boston Beer Co's ROIC is 8.04, and its WACC is 11.08.
Conclusion
In summary, Boston Beer Co's stock appears to be modestly undervalued. The company's financial condition is strong, and its profitability is robust. However, its growth ranks worse than 67.6% of 179 companies in the Beverages - Alcoholic industry. For more details about Boston Beer Co's stock, you can check out its 30-Year Financials here.
To find high-quality companies that may deliver above-average returns, check out the GuruFocus High Quality Low Capex Screener.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
