Boston Beer has been treading water for the past six months, recording a small return of 3.4% while holding steady at $313.04. The stock also fell short of the S&P 500’s 14% gain during that period.
Is now the time to buy Boston Beer, or should you be careful about including it in your portfolio? Get the full stock story straight from our expert analysts, it’s free.We don't have much confidence in Boston Beer. 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. 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’s demand was weak over the last three years as its sales fell at a 2.6% annual rate. This was below our standards and is a sign of lacking business quality. 
2. 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 indicates its newer products will spur better top-line performance, it is still below average for the sector.
3. 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.
Final Judgment
Boston Beer isn’t a terrible business, but it isn’t one of our picks. With its shares lagging the market recently, the stock trades at 28.4x forward price-to-earnings (or $313.04 per share). This multiple tells us a lot of good news is priced in - we think there are better opportunities elsewhere. We’d suggest looking at TransDigm, a dominant Aerospace business that has perfected its M&A strategy.
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