Although the S&P 500 is down 1.4% over the past six months, Boston Beer’s stock price has fallen further to $240.11, losing shareholders 17% of their capital. This was partly due to its softer quarterly results and 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.
Even though the stock has become cheaper, we're sitting this one out for now. Here are three reasons why you should be careful with SAM 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. Long-Term Revenue Growth Flatter Than a Pancake
Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Unfortunately, Boston Beer struggled to consistently increase demand as its $2.01 billion of sales for the trailing 12 months was close to its revenue three years ago. This wasn’t a great result and is a sign of lacking business quality. 
2. Fewer Distribution Channels Limit its Ceiling
With $2.01 billion in revenue over the past 12 months, Boston Beer is a small consumer staples company, which sometimes brings disadvantages compared to larger competitors benefiting from economies of scale and negotiating leverage with retailers.
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 2%. While this projection suggests its newer products will catalyze better top-line performance, it is still below the sector average.
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× forward price-to-earnings (or $240.11 per share). This valuation tells us a lot of optimism is priced in - we think there are better stocks to buy right now. We’d suggest looking at a fast-growing restaurant franchise with an A+ ranch dressing sauce.
Stocks We Would Buy Instead of Boston Beer
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