Boston Beer (SAM): Buy, Sell, or Hold Post Q3 Earnings?

Over the last six months, Boston Beer’s shares have sunk to $254.50, producing a disappointing 7.5% loss - a stark contrast to the S&P 500’s 7.7% gain. This may have investors wondering how to approach the situation.

Is there a buying opportunity in Boston Beer, or does it present a risk to your portfolio? Get the full breakdown from our expert analysts, it’s free .

Despite the more favorable entry price, we're cautious about Boston Beer. Here are three reasons why SAM doesn't excite us and a stock we'd rather own.

Why Is Boston Beer Not Exciting?

Known for its flavorful beverages challenging the status quo, Boston Beer (NYSE:SAM) is a pioneer in craft brewing and a symbol of American innovation in the alcoholic beverage industry.

1. Revenue Spiraling Downwards

A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Boston Beer struggled to consistently generate demand over the last three years as its sales dropped at a 2.6% annual rate. This was below our standards and signals it’s a lower quality business.

Boston Beer (SAM): Buy, Sell, or Hold Post Q3 Earnings?

2. Less Negotiating Power with Suppliers

Boston Beer is a small consumer staples company, which sometimes brings disadvantages compared to larger competitors benefiting from economies of scale and negotiating leverage.

Boston Beer (SAM): Buy, Sell, or Hold Post Q3 Earnings?

3. Projected Revenue Growth Is Slim

Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.

Over the next 12 months, sell-side analysts expect Boston Beer’s revenue to rise by 3.1%. While this projection suggests its newer products will fuel better top-line performance, it is still below average for the sector.

Final Judgment

Boston Beer isn’t a terrible business, but it doesn’t pass our bar. After the recent drawdown, the stock trades at 22.6× forward price-to-earnings (or $254.50 per share). At this valuation, there’s a lot of good news priced in - we think there are better investment opportunities out there. Let us point you toward Wabtec, a leading provider of locomotive services benefiting from an upgrade cycle .

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