I feel that The Boston Beer Company, Inc. (NYSE:SAM) is a stock that long-term investors should be looking at as a potential buy. In determining why I find Boston Beer Company an attractive stock, I will be looking at the company's financial performance, current valuation, recent trading activity, dividend policy, earnings and future outlook while comparing those areas to a few competitors.
The Boston Beer Company produces a wide range of alcoholic beverages ranging from beers under the Samuel Adams brand, flavored malt beverages under the Twisted Tea brand, and hard cider beverages under the Angry Orchard brand. Boston Beer Company was founded in 1984 and is based in Boston, Massachusetts.
|Gross Profit Margin (Quarterly)||53.31%|
|Profit Margin (Quarterly)||11.87%|
|Return on Assets (TTM)||18.70%|
|Return on Equity||27.54%|
|Revenue (Quarterly YOY Growth)||30.02%|
Looking at the chart below, you can see that Boston Beer Company ranks between Molson Coors Brewing Company (NYSE:TAP) and Craft Brew Alliance (NASDAQ:BREW) with a 64.73% increase in revenue over the past five years.
However, when looking at the past two years, Boston Beer Company has performed the best in terms in increasing revenue (34% increase compared to 18% and 19% increases by Craft Brew Alliance and Molson Coors Brewing).
When breaking it down to the past year, Boston Beer Company is the only one of the three to post a double digit increase in revenue.
The same is true when looking at gross profit of the three companies over the past year.
Current Valuation and Trading Activity
The Boston Beer Company is currently trading at $221.13, which is $44.40 lower than its 52-week high and $86.71 higher than its 52-week low. It is trading below its 50-day moving average of $237.77 but higher than its 200-day moving average of $219.60.
Boston Beer Company has a current PE ratio of 48.91x and a price to book value of 10.08x.
The company has seen the following price returns:
|1 Month Price Return||-6.65%|
|1 Year Price Return||58.58%|
|3 Year Price Return||132.50%|
Over the past 10 years, Boston Beer Company has seen the best returns when compared to Craft Brew Alliance and Molson Coors Brewing, with the majority of its gains occurring in the past few years.
Boston Beer Company does not pay a dividend. While I usually prefer stocks that pay dividends, I think it is wise to have at least a small percentage of non-paying dividend stocks in a portfolio.
When considering at a stock that doesn't pay a dividend, one of the most important things I look for is earnings growth. For its last reported quarter, earnings per share increased from $3.14 (the same period prior year) to $3.85.
Looking at the chart below, you can see that Boston Beer Company has been able to fairly steadily increase its earnings over the past several years. When compared to the other two competitors, Boston Beer Company has not only seen the best results, but has also been much more consistent.
While several craft breweries have struggled recently, Boston Beer Company has seen tremendous support of its brands. In its last quarterly report, the company reported a 30% increase in revenue over the same period last year.
I believe that Boston Beer Company is making the right moves to help ensure future success. While increases in advertising and promotions have kept earnings growth from being even greater, the company is doing a great job of adding long lasting value to its brand. I believe in the long run this will benefit the company and its investors as growth continues over the next several years. This growth, I believe, will spur improving margins that will keep earnings growing at a respectable level for quite some time.
Looking at Boston Beer Company's stock history over the past several years, you can see that it has had an impressive run. I believe that this run is going to continue and that long-term investors will be rewarded as the company's brands continue to grab market share. I think that today's price drop (around 8%) has created a good entry point for new investors. As always, I recommend individual investors perform their own research before making any investment decisions.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.