For Aggressive Investors:
Boston Beer Co. |  - Co. Spotlights available via RSS feed
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This column is for investors willing to take more risk and potentially receive more reward. The stocks mentioned in this column are not recommended to buy or sell. They're brought to your attention so you can investigate them further to determine if they fit your risk profile. Most of the stocks will have less than $1 billion of market capitalization, have more volatility than other stocks, and oftentimes no earnings. And some will have tremendous stories. | | SAM | $45.67 | Why It's Featured: Increasing sales and earnings; no debt, new highs.
Danger Zones: Stock at all-time high, up over 177% in 10 months. | Forward P/E | 18.5 | | Earn. Growth | 16% | | Projected Sales Growth | 8.5% | | Market Cap. | $700M |
February 5, 2010 - Boston Beer Co. (SAM-NYSE) produces and sells low alcohol beverages primarily in the United States, Canada, Europe, Israel, the Caribbean, the Pacific Rim, and Mexico. The company markets approximately 20 beers under the Samuel Adams or Sam Adams brand names; 7 flavored malt beverages under the Twisted Tea brand name; and 1 hard cider under the Hard Core Cider brand name.
It also produces malt beverages and hard cider products under contract for third parties. The company sells to a network of wholesale distributors, who then sell to retailers, such as pubs, restaurants, grocery chains, package stores, stadiums, and other retail outlets. The Boston Beer Company was founded in 1984 and is based in Boston, Massachusetts.
While earnings were lower in 2008, expect a strong comeback for 2009 (quarterly and full year numbers will be out on March 10). In 2007, earnings per share were $1.85, then slipped to $1.61 in '08. For '09, 4 analysts have a consensus estimate of $2.22, then for 2010, $2.47. Not bad in an economy that's still reeling from high unemployment and home foreclosures.
While earnings have been erratic, revenues have continued to climb, going from $285.4 million in 2006 to $341.3 million in '07, followed by $398.4 million in '08. Last year should close at $417.63 million; 2010 is forecast to total $433.84 million. Clearly, they're making what people want to drink.
Third quarter results give a good example of why the stock is doing so well. Earnings beat analysts' expectations by 85%, coming in at 72 cents a share, well above the 39 cents predicted. Furthermore, at the quarterly call management raised earnings guidance for the second time in less than six months, up to $2.05 - $2.35, from $1.75 - $2.05. In three months, the stock improved 25%.
The company is getting the best of both worlds: sales are climbing while commodity costs are lower, expanding margins. Furthermore a new plant in Pennsylvania with greater efficiencies opened and is contributing. But going forward, there is a concern that raw materials prices will be higher. And management has a tendency to be conservative when it comes to spending on marketing. (What a surprise from a Boston company!) Even with those two caveats, analyst see a better 2010.
Some attractive attributes that stand out beside increases in sales and profits: there is no debt. There's $45 million in the bank or $3.14 a share. Current ratio is 1.38. Insiders own 36.2% of the stock. Return on equity in the last 12 months was a notable18.09%.
More numbers: Price to sales is 1.62. Price to book is 4.03. Book value is $11.60. Operating margin for the last 12 months was 11.98%. Profit margin was 6.62%. Beta is .97. 52-week low was on March 12, 2009 at $17.50. 52-week high was on January 5, 2010 at $49.38. There is no dividend.
The company likes its own shares, buying back 139,500 of them in the first nine months of 2009 at an average price of $29.39. The board had authorization to buy up to $140 million worth and to date, accumulated 8.6 million shares at an average price of $13.73 a share. There's about $22 million worth of purchasing power left in the current authorization. There are only 14.25 million shares outstanding.
Boston Beer is well liked, by investors and consumers. The stock has enjoyed a great run in a relatively brief time. Whether it can continue its rapid rise is questionable but not without possibility. As an aggressive investor, it would be good to dig deeper into this one, watch it carefully, and if it fits your risk profile, look for a lower price point for purchase.
- Company Web site: www.bostonbeer.com - Ted Allrich |
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